SAT 25 SEPT, 2021-theGBJournal- The overnight (OVN) rate contracted by 50bps w/w to 17.3%, as inflows from FAAC disbursements (c. NGN407.71 billion) and FGN bond coupon payments (NGN59.54 billion) outweighed funding pressures for the monthly FGN bond auction (NGN277.05 billion) and CBN’s weekly FX auction.
We expect the OVN rate to expand next week, as we expect the Central Bank of Nigeria (CBN) to maintain its tight liquidity management posture and mop up the combined NGN145.77 billion inflows from OMO maturities (NGN105.00 billion) and FGN bond coupon payments (NGN40.77 billion).
The Treasury bills secondary market traded with bearish sentiments, as local banks sold off instruments to meet their funding obligations. Thus, the average yield expanded by 6bps to 6.0%. Across the market segments, the average yield at the OMO segment expanded by 8bps to 6.4%. Similarly, the average yield at the NTB segment closed higher by 6bps to 5.6%.
In the coming week, we expect the outcome of the NTB auction to shape the direction of yields in the T-bills market. At the auction, the CBN is set to roll over NGN111.87 billion worth of maturities to market participants.
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