SAT 16 JAN, 2021-theGBJournal- In line with our expectation, the overnight (OVN) rate dipped by 833bps w/w, to 1.0% as inflows from OMO (NGN211.25 billion) and NTB (NGN125.14 billion) maturities as well as FGN bond coupon payments (NGN40.68 billion) outweighed outflows for the Federal Government Cash Remittance provisioning by banks (c. NGN100.00 billion) as well as the CBN’s weekly OMO (NGN80.00 billion) and FX auctions.
We expect the OVN rate to remain depressed next week as inflows from OMO maturities (NGN226.31 billion) and FGN bond coupon payments (NGN40.68 billion) hit the system.
Trading in the Treasury bills secondary market was mixed as risk-off sentiments persisted amidst the low yields on offer. Specifically, average yield across all instruments pared by 1bp to 0.7%.
At the NTB segment, average yield expanded by 8bps to 0.5%, as market participants sold off early in the week in anticipation of higher yields at the NTB PMA. At the PMA, the CBN offered NGN232.36 billion worth of instruments, but only allotted 46.1% of the amount on offer.
Precisely, the allotment was split between NGN15.92 billion of the 91-day, NGN25.37 billion of the 182-day and NGN65.93 billion of the 364-day – at respective stop rates of 0.5000% (previously 0.0350%), 1.000% (previously 0.5000%), and 1.5000% (previously 1.2100%).
Elsewhere, average yield at the OMO segment declined by 7bps to 0.8% as local banks reinvested OMO maturities.
We maintain our view that the T-bills market will continue to be thinly traded amidst the unattractive yields in the space.-With Cordros Research