SAT 05 JUNE, 2021-theGBJournal- It was another week of bearish trading in the Treasury bills secondary market, following the absence of renewed injections despite the improved system liquidity.
Specifically, the average yield across all instruments expanded by 28bps to 8.3%. Across the market segments, the average yield closer higher by 39bps to 10.0% at the OMO segment and by 16bps to 6.3% at the NTB segment. This week, the CBN sold NGN18.30 billion worth of bills to market participants at the OMO auction and maintained stop rates across the three tenors, as with previous auctions.
Next week, we still maintain our view of higher average yields on T-bills given as we expect system liquidity to remain repressed. Also, we expect quiet trading at the NTB market as participants’ position for next week’s PMA, with the CBN set to roll over NGN89.05 billion worth of maturities.
The overnight (OVN) rate contracted by 392bps w/w, to 15.3%. The contraction was due to an improvement in system liquidity (this week’s average: c. NGN248.79 billion vs prior week: c. -NGN300.55 billion) as inflows from OMO (NGN55.46 billion) offset outflows for CBN’s weekly FX and OMO auction (NGN18.30 billion).
We expect the OVN rate to remain elevated in the coming week as expected inflows from OMO maturities (NGN80.00 billion) may not be sufficient to saturate system liquidity.