Funding Rates Spike as the CBN Mops up Excess System Liquidity


Friday , January 5, 2018 10:00PM / @ZedcrestCapital

*** Debut Sovereign Green Bond records N101m oversubscription*** 

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The bond market remained bullish today, but at a lighter pace, with continued demand witnessed on the 2027s bonds and some buys on other maturities taking yields further downwards by 9bps. Average bond yields consequently declined to 13.54% from 13.63% recorded in the previous session. We expect the market to be relatively quiet opening next week as market players are expected to tread carefully whilst anticipating possible stop rates for the bond auction to be held the coming week. The sentiment however remains just slightly bullish, with strong support (possible retracements) expected at 13.40% for now, whilst noting that the last stop rates were at 13.20%.

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Treasury Bills

The T-bills market was slightly bearish today, with slight sell witnessed on some April & July bills. This came on the backdrop of a significant mop up in market liquidity via an OMO T-bill and retail FX sale by the CBN. The CBN sold a total of N260bn of the 111-day and 251-day maturities, with stop rates clearing at 12.65% and 14.45% respectively. We expect the market to open next week on a slightly bearish note, due to expectations of a further decline in system liquidity.


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Money Market

The OBB and OVN rates spiked to 18.33% and 19.00%, from 4% closing levels the previous day. This came on the backdrop of a significant mop up of liquidity via an OMO T-bill sale and the first retail FX auction for the year by the CBN today. System liquidity is consequently estimated to close the week below N50bn from about N483bn opening today.  We expect rates to trend higher opening next week as the market is estimated to get into repo for the first time since the 6th of December 2017.

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FX Market

The CBN Official spot rate remained stable at its previous day rate of N305.95/$. Rates at the Investors and exporters FX window depreciated by 0.06% to N361.31/$. Rates at the parallel market also depreciated by 0.03% to close the week at N360.70/$.

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