SAT 23 OCT, 2021-theGBJournal- Trading in the Treasury bills secondary market turned bearish as most local banks sold off instruments to fund their bids at the bond auction.
Consequently, average yield across all instruments expanded by 8bps to 5.9%. Across the market segments, the average yield expanded by 18bps to 5.4% at the NTB segment. Conversely, average yield contracted by 3bps to 6.4% at the OMO segment.
On Thursday, the CBN sold NGN30.00 billion worth of OMO bills to market participants and maintained the stop rates across the three tenors, as with prior auctions (103-day: 7.0%, 180-day: 8.5%, and 348-day: 10.1%).
Considering the expected strain on system liquidity and the prevailing bearish sentiments in the FI market, we expect average yields on T-bills to trend higher in the coming week.
Also, we expect quiet trading at the NTB segment in the first few days of the week, as participants position for the mid-week PMA, with the CBN set to roll over NGN150.05 billion worth of maturities.
Meanwhile, at the money market the overnight (OVN) rate remained elevated in the double-digit region this week amid funding pressures for the monthly bond auction (NGN192.76 billion), CBN’s weekly OMO (NGN30.00 billion) and FX auctions. However, it contracted slightly by 75bps w/w to 19.3%, following inflows from FGN bond coupon payments (NGN32.67 billion).
In the coming week, we except the OVN rate to trend northwards as the CBN should mop up the pent-up liquidity emanating from FAAC disbursements, FGN bond coupon payments (NGN160.32 billion) and OMO maturities (NGN91.00 billion).
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