SAT, AUGUST 05 2023-theGBJournal | At the Treasury Bills market, buoyant liquidity in the system triggered bullish sentiments in the Treasury bills secondary market as players looked to invest excess funds in short and long-dated bills.
As a result, the average yield across all instruments dipped by 15bps to 7.0%. Across the curve, the average yield contracted at the short (-26bps), mid (-1bp), and long (-17bps) segments following buying interest on the 83DTM (-102bps), 174DTM (-1bp), and 237DTM (-193bps) bills, respectively.
Next week, we expect demand for instruments in the T-bills secondary market to weaken, following our expectations of lower inflows into the system. Also, we expect participants’ focus to be shifted to the primary market, where the CBN is scheduled to roll over maturities worth NGN153.99 billion.
The FGN bonds secondary market traded with bearish sentiments this week as investors took profits on their positions across the curve. Consequently, the average yield expanded by 18bps to 13.3%.
Across the benchmark curve, the average yield expanded at the short (+21bps), mid (+15bps), and long (+13bps) segments following profit-taking activities on the MAR-2025 (+63bps), APR-2029 (+39bps), and MAR-2035 (+45bps) bonds, respectively.
We expect yields in the FGN bond secondary market to remain elevated in the medium term, specifically driven by our expectation of a sustained imbalance in the demand and supply dynamics. However, we highlight that deliberate actions by the DMO to keep the cost of borrowing moderate remains a downside factor.
This week, the overnight (OVN) rate expanded by 543bps w/w to 6.8% as CRR debits induced by CBN’s re-enforcement of the LDR compliance across the banks pressured the financial system. Nonetheless, we highlight that the OVN rate remained in single-digit as system liquidity remained elevated – average system liquidity settled at a net long position of N723.80 billion (vs. a net long position of N363.38 billion in the previous week).
We expect the OVN rate to remain at current levels in the coming week, in the absence of any significant inflows into the financial system.
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