SAT 23 JAN, 2021-theGBJournal- The overnight (OVN) rate expanded by 950bps w/w, to 10.5%. The rate was depressed for most of the week, as the system was awash with liquidity from Federation Account Allocation Committee (FAAC) disbursements (NGN341.90 billion), OMO maturities (NGN201.94 billion), FGN bond coupon payments (NGN110.98 billion) and FX Retail refunds.
However, debits in the latter part of the week for CRR, FGN bond PMA (NGN170.36 billion) and CBN’s weekly auctions – OMO (NGN170.00 billion) and FX –triggered the eventual expansion in the funding rate.
Next week, barring any significant mopping-up activity from the CBN, we expect the rate to trend southwards following inflows from OMO maturities (NGN190.15 billion) and FGN bond coupon payments (NGN82.86 billion).
Treasury bills
The Treasury bills secondary market remained bearish this week due to profit-taking at the tail end of the week on some mid and long-dated instruments.
Thus, average yield across all instruments expanded by 8bps to 0.7%. We highlight that, the overall market was dragged by the OMO segment (+13bps to 0.9%), where offshore investors sold off auction bills at the secondary market.
Elsewhere, trading in the NTB segment was mixed, with mostly retail trades consummated throughout the week. Average yield in the segment expanded slightly by 1bp to 0.5%. At the OMO auction, the CBN offered and fully allotted NGN170.00 billion to market participants across the 103, 180 and 362-day bills, with stop rates unchanged at 1.51%, 4.34% and 5.74%, respectively.
Considering the relatively lower inflows expected in the system next week, we expect low demand for T-bills and a slight expansion in yields from current levels. At the NTB segment, we expect market focus to be shifted to the PMA on Wednesday, where the CBN is expected to roll over NGN187.30 billion worth of instruments.
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