SAT, 04 JUNE, 2022-theGBJournal| The overnight (OVN) rate dipped significantly by 700bps w/w to close at 7.0% on the back of higher system liquidity.
For evidence, the average liquidity level for the week settled at NGN312.07 billion (vs NGN12.96 billion in the previous week) as inflows from FAAC disbursement (c.N400.00 billion) and OMO maturities (N62.69 billion) outweighed debits for CRR, OMO (NGN40.00 billion) and FX auctions.
We expect the OVN to trend upward in the coming week, as funding pressures from the CBN’s auction (NTB, OMO & FX) will likely offset the expected inflow from OMO maturities (NGN20.00 billion).
Activities in the Treasury bonds secondary market were mixed, albeit with a bullish tilt, as investors sustained their cherry-picking of attractive instruments across the curve. Thus, the average yield across all instruments pared by 6bps to close at 11.2%. Across the benchmark curve, the average yield contracted at the short (-11bps), mid (-7bps), and long (-3bps) ends as investors demanded the JAN-2026 (-60bps), FEB-2028 (-22bps), and MAR-2036 (-9bps) bonds, respectively.
We maintain our view of an uptick in bond yields in the medium term, as both the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply.
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