SAT 12 MARCH, 2022-theGBJournal- Trading in the Treasury bills secondary market reversed recent demand trend and closed on a bearish note this week, largely driven by the expiration of actively traded OMO instruments.
The average yield across all instruments expanded by 7bps to 3.5%. Across the market segments, the average yield expanded by 61bps to 3.9% at the OMO segment.
On Thursday, the Central Bank of Nigeria (CBN) offered and allotted NGN40.00 billion worth of OMO bills to participants and maintained stop rates across the three tenors (96DTM – 7.0%, 187DTM – 8.5% and 362DTM – 10.1%), as with prior auctions.
Elsewhere, the average yield at the NTB segment was unchanged at 3.4%. At Wednesday’s NTB auction, the CBN offered NGN94.00 billion for sale and recorded significant demand with a total subscription amount of NGN482.90 billion (bid-to-offer ratio: 5.1x).
Eventually, the CBN allotted NGN2.32 billion of the 91-day, NGN21.29 billion of the 182-day and NGN212.92 billion of the 364-day bills – at respective stop rates of 1.75% (previously 2.24%), 3.28% (previously 3.30%), and 4.10% (previously 4.35%).
Next week, we expect the outcome of the NTB auction to shape the direction of yields in the T-bills market. The CBN is set to roll over NGN58.04 billion worth of maturities to market participants at the auction.
Meanwhile, at the money market, the overnight (OVN) rate contracted by 883bps w/w to 5.0% as the healthy system liquidity position from last week coupled with this week’s inflow from OMO maturities (NGN106.22 billion) outweighed debits for net NTB issuances (NGN142.53 billion), OMO (NGN40.00 billion) and FX auctions.
In the coming week, we expect improved system liquidity as inflows from FGN bond coupon payments (NGN142.09 billion) and OMO maturities (NGN105.00 billion) are likely to offset funding pressures for CBN’s auctions. Thus, we expect the OVN to trend downwards.
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