…The Debt Management Office (DMO offered bills worth N409.98 billion – N60.69 billion for the 91-day, N66.25 billion for the 182-day and N283.04 billion for the 364-day bills
SAT AUG 24 2024-theGBJournal|Trading in the Treasury bills secondary market was bullish this week as the average yield across all instruments fell by 197bps to 23.3% at close of trading Friday.
Cordros Research analysts attribute this week’s performance to participants looking to fill unmet bids from the week’s NTB PMA at the secondary market amid the anticipation of a decline in yields.
Across the market segments, the average yield contracted by 263bps to 22.3% at the NTB segment and dipped by 72bps to 25.1% at the OMO segment.
At the NTB auction, the Debt Management Office (DMO offered bills worth N409.98 billion – N60.69 billion for the 91-day, N66.25 billion for the 182-day and N283.04 billion for the 364-day bills.
Subscription level settled significantly higher at N1.03 trillion (previous auction: NGN486.87 billion), with a bid-to-offer ratio of 2.5x.
The auction closed with the DMO allotting instruments worth N291.03 billion – N41.89 billion for the 91-day, N52.00 billion for the 182-day, and N197.14 billion for the 364-day papers – at respective stop rates of 18.20% (previous: 18.50%), 19.20% (previous: 19.50%) and 20.90% (previous: 21.89%).
Based on our expectation of a possible liquidity deficit in the coming week, we expect yields in the Treasury bills secondary market to trend higher, as participants in the market look to fulfil their funding needs.
At the money market, the overnight (OVN) rate contracted by 681bps w/w to 26.2%, as inflows from FAAC disbursements (N926.92 billion), FGN bond coupon payments (N359.33 billion) and net NTB repayments (N118.94 billion) offset debits for the FGN bond PMA, (N374.75 billion), CRR debits (NGN550.31 billion), and other payments (N526.25 billion), saturating the financial system.
Consequently, deposit money banks (DMBs) deposits at the CBN’s SDF window surged (N1.83 trillion), causing the average system liquidity for the week to settle at a net short position of N171.94 billion (vs net long position of N407.16 billion in the prior week).
Next week, we anticipate the system liquidity will likely remain under pressure as the inflows from OMO maturities (N16.00 billion) will be insufficient to support the financial system. Thus, we expect an expansion in the OVN rate.
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