Home Money MARKETS BRIEF: Tight system liquidity continues to force Treasury bills sell-offs, treasury...

MARKETS BRIEF: Tight system liquidity continues to force Treasury bills sell-offs, treasury bonds hover around 9.5% as investors reacted to weak economic data


SAT 20 MARCH, 2021-theGBJournal- The overnight (OVN) rate expanded by 11.33ppts, w/w, to 25.5% as outflows for CRR debits, FX auctions, OMO auction (NGN60.00 billion) and net NTB issuances (NGN14.84 billion) offset inflows for OMO maturities (NGN143.35 billion), and FGN bond coupon payments (NGN142.09 billion).

We expect the OVN rate to trend southwards but remain elevated next week, as outflows for CBN’s weekly auctions and arbitrary CRR debits, if any, are likely to offset inflows from OMO maturities (NGN50.00 billion) and FGN bond coupon payments (NGN18.12 billion).

Treasury bills

The Treasury bills secondary market closed the week on a bearish note, as the tight system liquidity continues to force sell-offs from banks. Also, there was some level of inactivity from market participants, as they shifted their focus to the PMAs in both market segments.

Against the preceding, the average yield across all instruments expanded by 13bps to 5.3%. Across the market segments, the average yield declined by 19bps to 6.6% at the OMO secondary market and expanded by 64bps to 3.5% at the NTB segment. At this week’s OMO auction, the CBN sold NGN100.00 billion worth of bills to market participants and maintained stop rates across the three tenors, as with previous auctions.

At the NTB auction, the CBN offered NGN47.06 billion – NGN1.50 billion of the 91-day, NGN8.39 billion of the 182-day, and NGN37.18 billion of the 364-day – in bills and ultimately allotted NGN61.90 billion. The auction stop rates were unchanged at 2.00% and 3.50% on the 91D and 182D bills but increased by 50bps to 7.00% on the 364D bill.

With liquidity expected to remain tight in the coming week, we expect yields to maintain their uptrend.


The Treasury bonds secondary market turned bearish, as investors reacted to the weak economic data released early in the week – February 2021 CPI: 17.33%; Q4-20 Unemployment: 33.28% – and traded cautiously in anticipation of MPC’s rate decision next week.

Consequently, the average yield in the space expanded by 26bps to 9.5%. Across the benchmark curve, the average yield was higher at the short (+44bps), mid (+27bps), and long (+12bps) segments, following profit-taking on the JAN-2026 (+121bps), MAR-2027 (+56bps) and APR-2037 (+37bps) bonds, respectively.

In the coming week, we expect the outcome of the auction to influence the direction of yields in the bonds secondary market. At the auction, the DMO is offering instruments worth NGN150.00 billion through re-openings of the 16.2884% FGN MAR 2027, 12.50% FGN MAR 2035 and 9.80% FGN JUL 2045 bonds. In the longer term, we maintain our yield uptick stance, as the DMO’s intention to securitize the Ways and Means balance portends more supply.

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