SAT 17 APRIL, 2021-theGBJournal-The overnight (OVN) rate jumped by 15.83 ppts w/w to 28.3% as outflows for CRR debit, weekly OMO (NGN20.00 billion) and FX auctions, and NTB net issuances (NGN83.82 billion) outweighed inflows from OMO maturities (NGN20.00 billion) and FX retail refunds.
In the coming week, we expect the OVN rate to trend lower, but remain elevated, given the low level of inflow – OMO maturities (NGN10.00 billion) – expected in the system with respect to outflows.
Treasury bills
As in prior weeks, the Treasury bills secondary market closed on a bearish note, as market participants offloaded positions due to (1) the tight liquidity in the system, (2) and in anticipation of higher rates at the week’s auctions. Thus, the average yield across all instruments expanded by 25bps to 6.0%.
Across the market segments, the average yield expanded by 44bps to 7.2% at the OMO secondary market but dipped by 6bps to 4.0% at the NTB secondary market. At the OMO auction, the CBN sold NGN20.00 billion worth of bills to market participants and maintained stop rates across the three tenors, as with prior auctions.
At the NTB auction, the CBN offered NGN69.60 billion – NGN15.92 billion of the 91-day, NGN4.50 billion of the 182-day, and NGN49.14 billion of the 364-day – in bills and ultimately allotted NGN153.38 billion, 120.5% higher than offered due to the strong subscription (Bid-cover multiple of 3.6x vs 2.2x at the last auction).
The auction stop rates were unchanged at 2.00% and 3.50% on the 91D and 182D bills but increased by 100bps to 9.00% on the 364D bill.
We maintain our stance on higher average yield on T-bills for next week, as we expect the dearth of liquidity to persist in the market.
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