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Money market: Depressed system liquidity subdues performance in the T-bills market, overnight rate expands 217bps, w/w, to 19.2%

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SAT 29 MAY, 2021-theGBJournal- As in prior weeks, the depressed system liquidity underpinned another bearish performance in the Treasury bills secondary market as local banks continued to sell-off positions to fund their liquidity obligations. Thus, the average yield across all instruments expanded by 31bps to 8.0%.

Across the market segments, average yield closed higher by 36bps to 9.6% at the OMO secondary market and by 34bps to 6.1% at the NTB segment. At this week’s OMO auction, the CBN sold NGN41.00 billion worth of bills to market participants and maintained stop rates across the three tenors, as with previous auctions.

Also, the bi-weekly NTB PMA held on Wednesday. At the PMA, the CBN offered bills worth NGN63.18 billion with allotments of NGN3.12 billion of the 91D, NGN4.12 billion of the 182D and NGN143.88 billion of the 364D – at respective stop rates of 2.50% (previously 2.50%), 3.50% (previously 3.50%), and 9.65% (previously 9.75%).

We still expect the yield on T-bills to maintain its uptick in the coming week, given the expected tight liquidity picture.

Meanwhile, the overnight (OVN) rate expanded by 217bps, w/w, to 19.2%, following  funding pressures for CRR debits, NTB net issuances (NGN87.95 billion) and CBN’s weekly OMO (NGN41.00 billion).

FX auctions offset inflows from FAAC disbursements (c. NGN390.00 billion), OMO maturities (NGN110.00 billion), FGN bond coupon payments (NGN14.91 billion) and FX retail refunds.

Next week, system liquidity is expected to remain tight and the OVN rate to trend northwards in the absence of any significant inflows to the system.

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