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Treasury bills market depressed by Illiquidity as yield across instruments end week 52bps up to 6%

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SAT 24 APRIL, 2021-theGBJournal- The Treasury bills secondary market remained bearish following the persistent illiquidity in the interbank market. As a result, the average yield across all instruments expanded by 52bps to 6.5%.

Across the market segments, the average yield was higher by 52bps to 7.7% at the OMO secondary market and by 58bps to 4.6% at the NTB secondary market. At this week’s OMO auction, the CBN offered and allotted bills worth NGN20.00 billion with allotments of NGN5.00 billion of the 96-day, NGN5.00 billion of the 187-day and NGN15.00 billion of the 355-day – at respective stop rates of 6.90% (previously 7.00%), 8.48% (previously 8.50%), and 10.10% (unchanged).

Given our expectation for improved system liquidity next week, we expect increased demand for T-bills and envisage yields will moderate from current levels. Also, we expect quiet trading at the NTB market as participants position for next week’s PMA, with NGN88.46 billion worth of maturities on offer.

Money market

The overnight (OVN) rate ended the week lower (contracted by 11.58 ppts w/w to 16.8%) but remained elevated due to the reduced level of inflows from OMO maturities (NGN10.00 billion) amid significant funding pressures in the system for FGN bond (NGN274.45 billion), CBN’s weekly FX and OMO (NGN20.00 billion) auctions.

Considering inflows from FAAC disbursement, FGN bond coupon payments (NGN160.32 billion) and OMO (NGN20.00 billion) maturities, we expect the OVN rate to remain range bound at current level, barring any significant mop-up activity by the CBN.

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