…The overnight (OVN) rate inched higher by 1bp w/w to 27.0%, driven by a weaker liquidity balance at the start of the week
SAT MAY 17 2025-theGBJournal| The FGN Bond average yield edged lower on Friday by 4bps to 19.0% as market participants reinvested coupon proceeds.
Across the benchmark curve, the average yield rose at the short (+1bp) end, driven by selloffs of the MAR-2027 (+9bps) bond, while it fell across the mid (-12bps) and long (-5bps) segments following demand for the JUL-2034 (-27bps) and APR-2037 (-20bps) bonds.
Over the medium term, a moderation in bond yields is anticipated, influenced by two factors – the anticipated dovish monetary policy stance and demand and supply dynamics.
Proceedings in the Treasury bills secondary market were mixed, underpinned by local investors’ demand for NTBs and offshore participants’ selloffs of OMO instruments following volatile oil prices.
Consequently, the average yield across all instruments advanced by 23bps to 23.7%. Across the market segments, the average yield declined by 13bps to 20.8% in the NTB market, while it increased by 4bps to 26.9% in the OMO segment.
Looking ahead, we expect the subdued system liquidity to cause yields to rise in the secondary market. Also, the DMO is scheduled to conduct an NTB PMA next Wednesday (21 May) with N500.00 billion worth of maturing bills on offer.
At the money market, the overnight (OVN) rate inched higher by 1bp w/w to 27.0%, driven by a weaker liquidity balance at the start of the week, undermining the inflows from FGN bond coupon payments (N220.00 billion) and net CRR credits (c. N57.00 billion).
The average system liquidity settled at a lower net long position of N230.04 billion (vs a net long position of N915.26 billion in the previous week).
Next week, the inflows from FGN bond coupon payments (N17.87 billion) and OMO maturities (N1.14 billion) will be insufficient to support system liquidity. As such, the OVN rate is likely to trend higher amid an expected net NTB overallotment.
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