…At this week’s NTB auction, the CBN offered instruments worth N265.50 billion
…At the money market, the overnight (OVN) rate expanded by 882bps w/w to 25.8%, as the settlements for the FGN bond auction
SAT, FEB 24 2024-theGBJournal| T-bills and the FGN bonds secondary market closed the week on bearish note, driven by tight system liquidity.
T-bills average yield across the market expanded by 91bps to 16.9% – average yield increased by 119bps to 16.7% in the NTB segment but declined by 6bps to 17.8% in the OMO secondary market.
At this week’s NTB auction, the CBN offered instruments worth N265.50 billion – N11.96 billion for the 91-day, N10.21 million for the 182-day and N243.33 billion for the 364-day – to market participants.
Demand at the auction was higher than the previous PMA, as the total subscription level settled at N2.24 trillion (previous auction: N1.98 trillion).
The auction ended with the CBN allotting bills worth N1.59 trillion – N331.01 billion for the 91D, N66.25 million for the 182D and N1.19 trillion for the 364D – at respective stop rates of 17.00% (previously: 17.24%), 18.00% (previously: 17.50%), and 19.00% (previously: 19.00%).
In the upcoming week, we anticipate higher demand for instruments in the Treasury bills secondary market following our expectation of surplus liquidity in the financial system.
Thus, we believe yields in the market would likely trend lower.
Similarly, the FGN bonds secondary market closed on a bearish note, as the average yield across all instruments advanced by 68bps to 16.8%.
Across the benchmark curve, the average yield increased at the short (+89bps), mid (+480bps), and long (+15bps) segments, following sell pressures on the MAR-2025 (+392bps), FEB-2031 (+1841bps), and MAR-2036 (+154bps) bonds, respectively.
At this month’s auction, the DMO offered instruments worth N2.50 trillion to investors through new issuances of the 18.50% FGN FEB 2031 (Bid-to-offer: 0.9x; Stop rate: 18.50%) and 19.00% FGN FEB 2034 (Bid-to-offer: 0.7x; Stop rate: 19.00%) bonds.
The subscription level settled at N1.90 trillion, translating to a bid-to-offer ratio of 0.8x (vs bid-to-offer ratio of 1.7x at last month’s auction). Eventually, the DMO allotted instruments worth N1.49 trillion, resulting in a bid-to-cover ratio of 1.3x.
Likewise, the FGN Eurobond market commenced the week on a bearish note as investors indulged in profit-taking activities.
However, there was a reversal of this trend notwithstanding the revelation in the FOMC minutes that policymakers suggested no imminent rate cuts until they were more confident in inflation easing.
In the end, the bears reigned as the average benchmark yield rose 21bps week-on-week, settling at 9.79%.
At the money market, the overnight (OVN) rate expanded by 882bps w/w to 25.8%, as the settlements for the FGN bond auction (N1.49 trillion) and net NTB issuances (N1.32 trillion) outstripped inflows from CRR refunds (N1.23 trillion) and FGN bond coupon payments (N112.67 billion).
However, banks’ exposure at the CBN’s SLF window on Friday (N1.18 trillion) buoyed the average system liquidity to close at a net long position of N373.34 billion (vs. a net long position of N302.20 billion in the previous week).
Barring any significant outflows next week, we envisage the OVN rate will likely decline as we expect the inflows from FAAC disbursements (NGN742.54 billion) to support system liquidity.
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