Is Overnight Rate Jumping In Line With U.S Rate Hike?

An official of the Central Bank of Nigeria (CBN) said few days ago that Nigeria has nothing to worry about as the U.S hikes its rates. But overnight trading at the Open Market Operations (OMO) saw overnight rates jump.
After stalling the sale of treasury bills via Open Market Operations (OMO) for days, the Central Bank of Nigeria (CBN) today resumed the exercise again.
During the OMO auction on Monday, the apex bank raised N207 billion from the 87-day and 213-day bills to moderate the excess liquidity in the system.
At the close of transactions, the T-bills market traded on a relatively flat note with yields compressing marginally by 0.04 percent on average.
According to experts at Zedcrest Research, the yields are expected to trend slightly lower in the near term as system liquidity remains relatively buoyant.
This is as market players anticipate renewed inflows from possible FAAC payments and expected OMO maturities later in the week.
“This should however be moderated by a continued OMO intervention by the CBN most likely on Thursday,” Zedcrest Research analysts said.
Meanwhile, the money market rates sharply appreciated today with the Open Buy Back (OBB) and Overnight (OVN) rates closing at 11.33 percent and 12.83 percent respectively.
This followed the resumption in OMO auction by the CBN and funding by banks for their wholesale forex bids.
System liquidity is consequently estimated to compress to N200 billion from N450 billion previously.
“We expect rates to trend lower tomorrow as there are no significant funding pressures expected,” Zedcrest Research analysts disclosed.

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