SAT 16 OCT, 2021-theGBJournal- The Treasury bills secondary market ended the week on a bullish note following (1) the improved system liquidity in the early parts of the week and (2) market participants’ filling unmet demand from Wednesday’s NTB PMA at the secondary market. Consequently, the average yield across all instruments declined by 5bps to 5.8%.
Across the market segments, the average yield remained unchanged at 6.5% at the OMO segment but contracted by 7bps to 5.2% at the NTB segment.
At the NTB PMA, the CBN offered NGN121.66 billion for sale and eventually allotted NGN187.23 billion – NGN4.22 billion of the 91D, NGN6.95 billion of the 182D and NGN176.06 billion of the 364D bills with stop rates of 2.50% (unchanged), 3.50% (unchanged), and 7.25% (previously 7.50%), respectively.
Demand at this auction was very strong, with a subscription level of NGN493.03 billion (Bid-offer ratio: 4.1x vs previous auction: 1.6x).
We expect yields to further trend lower 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 550bps w/w to 20.0% following debits for CRR, net NTB issuances (NGN65.57 billion), CBN’s weekly OMO (NGN50.00 billion) and FX auctions amid inflow from OMO maturities (NGN110.00 billion).
In the coming week, we expect the OVN rate to trend lower but remain elevated in the double-digit region, given expected outflows for the monthly bond auction and CBN’s weekly auctions, which are likely to offset inflows from OMO maturities (NGN85.00 billion) and FGN bond coupon payments (NGN32.67 billion).-With Cordros Research
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