SAT 02 APRIL, 2022-theGBJournal| The overnight (OVN) rate expanded by 450bps, w/w, to 10.7%.
During the week, the OVN remained depressed as system liquidity remained healthy against the backdrop of the FAAC disbursement (c. NGN350.00 billion) from the prior week and inflows this week from FX retail refunds, OMO maturities (NGN10.00 billion) and FGN bond coupon payments (NGN40.77 billion).
However, the rate expanded at the end of the week following debits for CRR and the weekly OMO (NGN50.00 billion) and FX auctions.
In the absence of any significant inflows expected to hit the financial system next week, we expect system liquidity to be pressured. Thus, we envisage an expansion in the OVN rate from current levels.
The Treasury bonds secondary market traded with mixed sentiments, albeit with a bullish tilt, as market reaction to the higher NTB stop rates midweek dampened the buying interests witnessed in the early part of the week. Consequently, the average yield declined slightly by 1bp to 10.7%.
Across the benchmark curve, average yield expanded at the short (+1bp) end as investors took profits off the APR-2023 (+60bps) bond, but contracted at the long (-4bps) following demand for the MAR-2036 (-19bps) bond. Meanwhile the average yield was flat at the mid segment.
We maintain our view of an uptick in bond yields in the medium term, especially as we start a liquidity stiffened Q2-22, with the FGN’s borrowing plan (NGN2.57 trillion) for 2022FY pointing to elevated supply.
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