SAT, 14 MAY, 2022-theGBJournal | The Treasury bills secondary market sustained last week’s bullish sentiments following the liquidity-driven demand for bills at the secondary market.
Thus, the average yield across all instruments contracted by 7bps to 3.7%. Across the segments, the average yields contracted by 5bps and 7bps to 4.0% and 3.6% at the OMO and NTB secondary markets, respectively.
At the OMO auction this week, the CBN fully allotted NGN50.00 billion worth of OMO bills to participants and maintained stop rates across the three tenors – 103DTM: 7.0%, 180DTM: 8.5% and 355DTM: 10.1% – as with prior auctions.
Elsewhere, at the NTB PMA, demand continued to outweigh supply, as there was an oversubscription of 2.7x on NGN127.47 billion worth of bills on offer. As a result, the auction closed with the CBN allotting NGN1.02 billion of the 91-day, NGN2.83 billion of the 182 – day and NGN134.01 billion of the 364-day – at respective stop rates of 1.74% (unchanged), 3.00% (unchanged), and 4.70% (previously 4.79%).
With system liquidity expected to tighten in the coming week, we anticipate an increase in the average yield on T-bills from current levels.
At the money market, In line with our expectations, the overnight (OVN) rate expanded by 424bps w/w, to 9.2%, as funding pressures for CRR debits, CBN’s weekly OMO (NGN30.00 billion), FX auctions and NTB net issuance (NGN10.39 billion) outpaced the sole inflow from OMO maturities (NGN38.08 billion).
We highlight that system liquidity still remained healthy as the net liquidity position averaged NGN264.92 billion.
We expect the outflows for next week’s auctions (OMO and FGN bond) and arbitrary CRR debits, if any, to offset the inflows from OMO maturities (NGN35.00 billion) and FGN bond coupon payments (NGN8.50 billion). Thus, we expect the OVN to trend northwards.
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