SAT 13 NOV, 2021-theGBJournal- The Treasury bills secondary market ended the week on a bullish note as the healthy system liquidity, market participants’ filling unmet bids from Wednesday’s NTB PMA at the secondary market and lack of fresh supply at the OMO primary market, supported demand for T-bills.
Consequently, the average yield across all instruments declined by 31bps to 5.4%. Across the market segments, the average yield fell by 47bps and 15bps to 5.6% and 5.2% at the OMO and NTB segments, respectively.
At Wednesday’s NTB PMA, the CBN offered NGN150.82 billion worth of instruments for sale to market participants. Demand at this auction was solid, with the highest subscription level recorded this year – NGN574.88 billion (Bid-offer ratio: 3.8x vs previous auction: 2.9x).
Eventually, the CBN allotted NGN196.18 billion – NGN4.12 billion of the 91D, NGN3.00 billion of the 182D and NGN189.06 billion of the 364D bills with respective stop rates of 2.50% (unchanged), 3.50% (unchanged), and 6.50% (previously 6.99%).
We expect yields to trend lower further next week, as investors sustain buying activities in reaction to the moderation in the stop rate of the one-year paper at the last primary market auction.
The overnight (OVN) rate expanded by 288bps w/w to 15.3% this week, following the significant debits for CRR, net NTB issuances (NGN45.36 billion) and CBN’s weekly FX auction that offset the healthy system liquidity (average net liquidity position this week: NGN412.08 billion vs last week: NGN97.95 billion) experienced for most of the week.
In the coming week, we expect tighter liquidity in the system, as outflows for the November bond PMA, CBN’s weekly auctions may outweigh the sole inflow from OMO maturities (NGN72.50 billion). Thus, we expect the OVN to trend northwards.
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