…The overnight (OVN) rate expanded by 3bps w/w to 27.0%, despite the relatively robust system liquidity
SAT MAY 31 2025-theGBJournal| The FGN bond secondary market was bullish this week, reflecting investors’ reaction to the lower stop rates recorded at Monday’s FGN bond primary market auction.
As a result, the average yield declined by 15bps to 18.8%.
Across the benchmark curve, the average yield declined at the short (-33bps), mid (-8bps) and long (-1bp) segments, due to buying interest in the JAN-2026 (-115bps), FEB-2031 (-42bps) and APR-2049 (-6bps) bonds, respectively. The DMO conducted the monthly bond primary market auction for June on Monday.
At the PMA, the Debt Management Office (DMO) offered instruments worth NGN400.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 0.2x; Stop rate: 18.98%) and 19.98% FGN MAY 2033 (Bid-to-offer: 1.4x; Stop rate: 19.85%) bonds.
Total subscription level settled at N436.40 billion (previous: N495.95 billion), with a bid-to-offer ratio of 1.1x (previous: 1.4x).
Eventually, the DMO allotted instruments worth N300.69 billion across the two tenors, resulting in a bid-to-cover ratio of 1.5x.
Over the medium term, we retain our expectation for a moderation in bond yields, influenced by two factors including the anticipated dovish monetary policy stance and demand and supply dynamics.
Meanwhile, the overnight (OVN) rate expanded by 3bps w/w to 27.0%, despite the relatively robust system liquidity.
For context, inflows from OMO maturities (N984.22 billion) outweighed debits from the OMO PMA (N482.33 billion) and FGN bond PMA (N300.69 billion), suggesting that the slight uptick in OVN was likely driven by short-term funding pressures rather than a liquidity squeeze.
Activities at the CBN’s Standing Deposit Facility (SDF) window were heightened this week (N1.64 trillion) ensuring that the financial system wrapped the week buoyant, settling at an average net long position of N1.88 trillion (vs a net long position of N646.50 billion in the previous week).
In the absence of any mop-up activity by the CBN, we expect inflows from OMO maturities (N239.15 billion) to boost system liquidity in the coming week, weighing further on OVN rate, amid heightened activities at CBN’s SDF window.
At the Treasury bills secondary market, bullish sentiments prevailed as robust system liquidity caused the average yield across all instruments to decline by 36bps to 23.0%.
Across the market segments, the average yield declined by 6bps and 80bps to 20.7% and 25.7% in the NTB and OMO segments, respectively. At the OMO auction held on Wednesday (28 May) the DMO offered N600.00 billion across the 104-day and 139-day tenors at N300.00 billion each.
Total subscription settled at N687.13 billion (bid-to-offer: 1.1x), with the CBN eventually allotting N482.13 billion—N1.00 billion at 23.60% for the 104D and N481.13 billion at 24.98% for the 139D.
Looking ahead, Cordros Research say they expect robust system liquidity to sustain demand for Treasury bills, resulting in further declines in secondary market yields.
Additionally, CBN is scheduled to conduct an NTB PMA next Wednesday (4 June), with N450.00 billion worth of maturing bills on offer. At the auction, yields are expected to taper.
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