CBN to sustain aggressive mop up as analysts anticipate 17% increase in yields this week

THE CBN’S DESIRE TO KEEP THE SYSTEM illiquid, Deinma Iyagba, a currency trader at UBA has stated that the CBN will not relent with its OMO auctions as yields go up by 17 percent.

Iyagba said, “we are looking at yields to be up by 17 percent, that being said, the CBN will not relent in its weekly mop-ups, we have even seen special mop-ups, last week started a bit liquid, but with the constant OMOs and special OMOs, we have seen liquidity thin out and dry up, so we expect the aggressive mop-ups, and this may continue until the elections.”

Discussing the recent gains of the naira against the dollar, the currency trader said that it was more than the fall in demand or the increase in supply, as in recent weeks, foreign investors have begun to find the Nigerian assets attractive.

He said, “I want to believe that demand has remained the same, and despite ample supply, we have seen some foreign inflows and renewed interest in the Nigerian fixed income space given the high yields, with foreign portfolio investors coming. If the naira continues to strengthen at the rate it has been since the turn of the year, we are likely to see a N2 growth against the dollar this week, so, I am expecting to see a N362 to N364 trading band, “

Laying into the treasury bills market, Iyagba said, “In the t-bills market, we still see the bearish sentiment playing out, participants are trying to sell to raise liquidity, and the CBN has continued with its tightening stance mopping up liquidity, even with the yield maturity from last week Thursday, the CBN mopped it up almost immediately, right now the system is in the debit, with rates around 25 percent in the overnight

On the bond market, he said that the market remains largely quiet and it is themed by speculative transactions because the trading calendar is yet to be released.