SAT 07 AUG, 2021-theGBJournal- The overnight (OVN) rate expanded by 12.75ppts w/w to 20.5%. The rate remained in the single-digit territory through most part of the week following a higher net liquidity position (this week’s average: NGN219.50 billion vs last week: NGN80.69 billion) supported by OMO maturities (NGN19.20 billion).
However, the eventual expansion was driven by debits at the latter part of the week for CRR debits and CBN’s weekly FX auction.
We expect tighter liquidity in the system in the coming week, as funding for CBN’s weekly auctions are likely to outweigh expected inflows from OMO (NGN5.00 billion) maturities.
The Treasury bills secondary market closed the week on a bullish note following the healthy system liquidity in the week. Thus, the average yield across all instruments contracted by 64bps to 6.8%.
Across the market segments, the average yield at the OMO segment contracted by 91bps to 7.7%, as lesser funding pressures influenced improved demand for bills. Similarly, the average yield at the NTB segment contracted by 27bps to 5.6%.
We envisage the yield on T-bills will settle lower in the coming week, as investors improve buying activities in anticipation that issuances of instruments will reduce given the recent developments on foreign currency denominated borrowings (Eurobond issuance).
Also, we expect quiet trading in the first few days at the NTB market as participants position for the mid-week PMA, with the CBN set to roll over NGN51.49 billion worth of maturities.
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