SAT 24 JULY, 2021-theGBJournal- The overnight rate expanded by 24.00ppts w/w to 28.8%, as debits for CRR, FGN bond (NGN137.97 billion) and CBN’s weekly auctions outweighed system inflows from FAAC disbursements (c.NGN428.14 billion), FGN bond coupon payments (NGN134.74 billion) and OMO maturities (NGN20.00 billion).
We expect the OVN rate to remain elevated in the coming week, as expected inflows from FGN bond coupon payments (NGN53.28 billion) and OMO maturities (NGN16.84 billion) may not be significant enough to saturate system liquidity.
Treasury bills
The Treasury bills secondary market extended its bullish run this week, following sustained demand for higher yielding OMO instruments. Thus, average yield across all instruments contracted by 28bps to 7.8%. Across the market segments, the average yield at the OMO segment contracted by 73bps to 8.6% in the absence of fresh supply from the CBN.
Elsewhere, the average yield at the NTB segment expanded by 20bps to 6.9%, as participants sold off positions to meet short term funding obligations.
In the coming week, we maintain our view of a higher average yield on T-bills, given that we expect system liquidity to remain strained. Also, we expect quiet trading at the NTB market as participants position for the PMA scheduled to hold on 29 July, with the CBN set to roll over NGN216.19 billion worth of maturities.
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