FGN’s N300bn FGN bond expected to mature this week

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The expected increased liquidity mop-up this week is imperative in view of inflow of N492 billion from maturing FGN Bonds and TBs.

The inflow which comprised N300 billion worth of maturing FGN May 2108 (10.7percent) bond and N192 billion worth of maturing TBs, is expected to boost market liquidity, and offset impact of primary market TB auction of N49.6 billion.

However, with the apex bank expected to intensify liquidity mop up, the inflow may not translate to lower cost of funds as witnessed last week.

In spite inflow of N266.95 billion from matured TBs last week, cost of funds rose in response to sale of OMO TBs worth N113.31 billion by the CBN and sale of N50.45 billion worth of FGN Bond by the Debt Management Office (DMO).

Data from the FMDQ showed that interest rate on Collateralised (Open Buy Back, OBB) lending rose by 937 basis points (bpst) to 17.17 percent from 7.8 percent the previous week.

Similarly, interest rate on Overnight lending rose by 1,067 bpts to 19.67 percent from 9.0 percent the previous week. This trend, according to analysts at Cowry Asset is expected to persist this week.

“This week, CBN will sell T-bills amounting to N49.60 billion via the Primary market; viz: 91-day bills worth N4.96 billion, 182-day bills worth N24.80 billion and 364-day bills worth N19.84 billion which will partly offset the maturing treasury bills worth 192.01 billion.

We expect their stop rates to rise while also expecting CBN to aggressively mop up via OMO sales to make yields attractive to portfolio investors and to soak up excess liquidity from Federation Accounts Allocation Committee (FAAC) injections.

Financial system liquidity strain is therefore expected with resultant rise in interbank rates,” they said.