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Money market: Overnight rate expanded by 375bps w/w to 23.0% on liquidity squeeze, T-Bills extend bearish run

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SAT 26 JUNE, 2021-theGBJournal- The overnight rate expanded by 375bps w/w to 23.0% as debits for CRR, FGN bond (NGN325.80 billion) and FX auctions outweighed system inflows from FAAC disbursements (NGN363.86 billion) and OMO maturities (NGN15.00 billion).

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

Meanwhile, the Treasury bills secondary market extended its bearish run this week, as the tight liquidity in the system persisted.

Consequently, the average yield across all instruments expanded by 25bps to 8.3%. Across the market segments, the average yield at the OMO segment closed 6bps higher at 9.7% and similarly expanded by 54bps to 6.9% at the NTB segment. Notably, there was no OMO auction yesterday.

In the coming week, we maintain our view of a higher average yield on T-bills, given that we expect system liquidity to remain strained. Also, we expect quiet trading at the NTB market as participants position for next week’s PMA, with the CBN set to roll over NGN58.86 billion worth of maturities.

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