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

Business a.m. - - FINANCE & INVESTMENT -

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.

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