THUR, 24DEC, 2020-theGBJournal- The overnight rate (OVN) contracted by 392bps w/w to 0.6%. We note that the rate stayed depressed through the week as inflows into the system for SWAP and OMO maturities (NGN250.51 billion) saturated system liquidity.
With another liquidity influx from OMO maturities (NGN481.28 billion), we expect the OVN rate to remain depressed in the coming week.
Treasury bills
Trading activity in the Treasury bills secondary market was mixed, albeit with a bearish tilt, as average yield across all instruments expanded by 3bps to 0.5%. The overall market remained in a lull as investors maintain risk-off sentiments at current market yields. Across the segments, average yield expanded by 8bps to 0.5% at the OMO secondary market, but pared by 2bps to 0.4% at the NTB segment.
In the coming week, we maintain our view for quiet trading activities in the T-bills secondary market, as investors wrap up their books for year end. Also, we expect participants’ focus to be on the last NTB PMA for the year, where the CBN is expected to roll-over NGN74.84 billion worth of maturities.
Bonds
The Treasury bonds secondary market remained bearish, following profit-taking across the benchmark curve for year-end activities. Consequently, the average yield expanded by 56bps to 5.9%. Across the benchmark curve, average yield expanded at the short (+72bps), mid (+62bps) and long (+49bps) segments, due to sell-offs of the MAR-2025 (+159bps), FEB-2028 (+128bps) and MAR-2050 (+122bps) bonds, respectively.
We maintain our view of sustained bearish sentiments in the Treasury bonds secondary market, as investors continue to book profit accumulated in the year.
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