SAT 11 DEC, 2021-theGBJournal- The overnight (OVN) rate expanded by 200bps w/w to 17.8%. The increase in the funding rate was due to outflows for CRR, CBN’s weekly OMO (NGN30.00 billion) and FX auctions which outweighed this week’s sole inflow from OMO maturities (NGN50.00 billion).
We still expect the OVN rate to remain elevated at double-digit levels next week, given the thin inflows expected from OMO maturities (NGN40.00 billion) amid possible debits for CBN’s weekly auctions.
Treasury bills
Trading in the Treasury bills secondary market ended the week with bullish sentiments, as market participants looked to the secondary market to fill unmet demand from Wednesday’s NTB auction.
Consequently, average yields across all instruments contracted by 1bp to 4.9%, majorly driven by yield decline in the NTB space (-17bps to 4.3%). Similarly, the average yield on OMO bills pared by 1bp to 5.5%. At the bi-weekly NTB PMA, demand remained sizeable, as the NGN53.73 billion worth of bills on offer were oversubscribed by 4.6x.
The auction closed with the CBN allotting NGN1.55 billion of the 91D, NGN789.10 million of the 182D and NGN51.39 billion of the 364D, at respective stop rates of 2.50% (unchanged), 3.45% (previously 3.50%), and 5.34% (previously 5.89%).
Also, the CBN sold NGN30.00 billion worth of bills to market participants at this week’s OMO auction and maintained stop rates across the three tenors, as with previous auctions.
As we anticipate a tighter system liquidity next week, we expect higher yields on T-bills as local banks are likely to sell-off positions to meet funding requirements.
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