Money Market Review and Outlook

Amid expectations of inflows to hit the system this week, money market rates started the week lower than Friday’s closing rates. Open Buy Back and Over Night rates dropped 1.0% and 0.9% to settle at 3.5% and 4.1% at the end of Monday’s trading session. OBB and O/N rates dropped further to 3.0% and 3.3% on Tuesday on the back of the inflow from refunds of unfulfilled bids of Deposit Money Banks by the CBN. OBB and O/N rates however trended upwards to 3.3% and 3.8% respectively on Wednesday as a result of the CBN’s mopping up of N56.0bn from the financial system via an OMO auction. On Thursday, as expected, there was an OMO maturity of N96.4bn, OBB and O/N remained at Wednesday’s rates notwithstanding as the CBN also mopped up N49.2bn in OMO auction. OBB and ON settled at 3.1% and 3.7% on Friday, down 1.4% and 1.3% respectively W-o-W.

In the T-bills market, average rates trended similar to OBB and O/N rates. Average T-bills rate opened the week at 7.9% (from 8.6% last Friday), dropping to 7.8% on Tuesday on the back of increased buying interest. By the end of Wednesday’s trading session, average T-bills rate rose 0.1% to 7.9% on the back of the OMO auction floated by the CBN. Average rate rose even further to 8.0% by Thursday as the CBN mopped up another N49.2bn from the system. Average T-bills rate eventually closed the week at 8.2% down 0.4%W-o-W.

Next week, we expect money market rates to trend northwards as we expect the CBN to carry out more OMO mop-ups. There is a net T-bills maturity of N150.6bn expected to hit the system on Thursday, the impact of this on liquidity levels is however expected to be off-set by a rollover of the same net amount.