SAT, OCT 14 2023-theGBJournal|Proceedings in the Nigerian Treasury bills secondary market were bullish, driven by the combined impact of the excess liquidity in the system this week and participants covering for lost bids at the NTB auction held on Wednesday.
As a result, the average yield across all instruments declined by 141bps to 6.6%. Across the market segments, the average yield at the NTB segment contracted by 147bps to 6.5% and declined by 3bps to 12.1% in the OMO secondary market.
At this week’s NTB PMA, the DMO offered instruments worth N36.55 billion – N2.78 billion for the 91-day, N3.02 billion for the 182-day, and N30.76 billion for the 364-day bills – to participants and eventually allotted the total offer amount.
The auction was highly contested as the subscription level settled at N321.14 billion, translating to a bid-to-cover ratio of 8.8x (previous auction: 4.4x).
Hence, the auction stop rates closed lower at 3.67% (previously 4.99%), 5.11% (previously 6.55%), and 9.25% (previously 11.37%) on the 91D, 182D, and 364D bills, respectively.
Next week, we envisage lower demand for T-bills in the secondary market following our expectations of a squeezed system liquidity. Thus, we believe yields in the secondary market will head northward.
At the money market, just as envisaged, the overnight (OVN) rate contracted by 3bps to 1.7% this week.
We highlight that the depressed interbank rate was supported by prior week’s healthy system liquidity coupled with this week’s inflows from OMO maturities (N10.00 billion), which limited the impact of the week’s CRR debits (N430.43 billion) across the banking system.
Accordingly, the system liquidity averaged a net long position of NGN479.10 billion this week (vs a net long position of N804.77 billion in the previous week).
In the coming week, we expect the OVN rate to trend upwards as the debits for the FGN bond auction (N360.00 billion) will likely offset the expected sole inflow from the FGN bond coupon (N145.98 billion).
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