SAT JUNE 15 2024-theGBJournal|Trading in the Treasury bills secondary market was bullish this week as the average yield across all instruments declined by 11bps on Friday to close at 21.9%.
Analysts at Cordros Research attribute this week’s performance to participants looking to fill unmet bids from the week’s NTB PMA at the secondary market.
Across the market segments, the average yield contracted by 9bps to 21.9% at the NTB segment and dipped by 16bps to 21.8% at the OMO segment.
At the NTB auction, the Debt Management Office (DMO) offered bills worth N44.23 billion – N5.73 billion for the 91-day, N6.35 billion for the 182-day and N32.15 billion for the 364-day bills.
Subscription level settled lower at N538.02 billion (previous auction: N713.89 billion), with a bid-to-offer ratio of 12.2x. The auction closed with the DMO allotting instruments worth N55.23 billion – N6.78 billion for the 91-day, N8.36 billion for the 182-day, and N40.09 billion for the 365-day papers – at respective stop rates of 16.30% (previous: 16.50%), 17.44% (previous: 17.50%) and 20.50% (previous: 20.67%).
Following our outlook of liquidity surfeit in the financial system next week, we expect yields in the Treasury bills secondary market will likely maintain its downward trend.
Meanwhile, the overnight (OVN) rate contracted by 440bps w/w to 26.3%, as inflows from FAAC disbursements (c.N400.00 billion) completely offset the debits for Thursday’s net NTB issuance (N11.00 billion) and supported financial system liquidity.
Consequently, the average system liquidity for the week settled at a net long position of N684.11 billion (vs N377.38 billion in the prior week).
In the upcoming week, we anticipate the expected inflows from FGN bond coupon payments (N29.84 billion) and OMO maturities (N15.00 billion) will likely keep the system liquidity healthy in the absence of any significant mop-up action by the CBN.
Thus, we expect the OVN rate to temper from current levels.
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