SAT 28 AUG, 2021-theGBJournal- Bearish sentiments returned to the Treasury bills secondary market sustained as market participants sold off positions to meet funding obligations following the tight system liquidity at the beginning of the week.
Consequently, the average yield across all instruments expanded by 16bps to 5.5%. Across the market segments, the average yield at the OMO segment expanded by 9bps to 6.0%. Similarly, average yield at the NTB segment notched higher by 27bps to settle at 5.0%.
On Wednesday, there was a bi-weekly NTB PMA where the CBN offered bills worth NGN157.21 billion and eventually allotted NGN307.34 billion (the highest amount recorded this year) – NGN3.54billion of the 91D, NGN22.86 billion of the 182D and NGN280.93 billion of the 364D bills– at respective stop rates of 2.50% (unchanged), 3.50% (unchanged), and 6.80% (previously 7.35%).
We also note that the subscription at this auction was expectedly high at NGN392.12 billion (bid to offer ratio: 2.5x).
We expect the yield on T-bills to inch higher in the coming week, given the expected tight liquidity picture.
At the Money market, the overnight rate contracted by 15.33ppts w/w to 8.5%, as inflows from FAAC disbursements (c. NGN439.49 billion), OMO maturities (NGN157.27 billion) and FGN bond coupon payments (NGN49.89 billion) outweighed funding pressures for net NTB issuances (NGN150.13 billion) and CBN’s weekly OMO (NGN60.00 billion) and FX auctions.
We expect tighter liquidity in the system in the coming week as the CBN should mop up excess funding given its tight liquidity management posture. Also, we expect outflows for the weekly auctions to outweigh the only expected inflows from OMO maturities (NGN60.00 billion).-With Cordros Research
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