SAT, 18 JUNE, 2022-theGBJournal| The depressed system liquidity underpinned another bearish performance in the Treasury bills secondary market as participants sold off instruments in both market segments to generate funds amid declining offers at the long end of the curve following the outcome of the NTB auction.
Consequently, the average yield across all instruments expanded by 43bps to 4.6%. Across the segments, the average yield expanded by 51bps and 19bps to 4.6% apiece at the NTB and OMO segments. At the NTB auction, the CBN offered NGN34.88 billion – NGN5.91 billion of the 91-day, NGN1.10 billion of the 182-day, and NGN27.87 billion of the 364-day – in bills.
Demand was strong, with a subscription level of NGN178.46 billion (Bid-to-offer ratio: 5.1x; previously 2.0x) recorded. Eventually, the CBN allotted precisely what was offered N34.88 billion – N1.44 billion of the 91D, N1.28 billion of the 182D and NGN32.15 billion of the 364D bills – at respective stop rates of 2.49% (previously 2.50%), 3.79% (previously 3.84%), and 6.07% (previously 6.44%).
Next week, we expect the yields on T-bills to maintain the same trajectory, following the thin liquidity expected in the system.
Money market
This week, the overnight (OVN) rate contracted by 308bps at 10.9%, despite the tighter liquidity in the financial system. Notably, the average system liquidity settled at N9.78 billion (vs N140.12 billion in the previous week), following the weak liquidity level at the start of the week and subsequent debits for CBN’s FX auction amid the sole inflow from OMO maturities (N20.00 billion).
In the absence of any significant inflows in the system, we expect the OVN rate to remain elevated in the coming week following debits for the monthly FGN bond auction and the CBN’s FX auction.
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