Secondary market rates trend lower as analysts expect higher liquidity
RATES AP PEARED TO HAVE trended generally lower, but this week analysts are looking forward to a good quantum of liquidity from maturing OMO bills and Treasury Bills. This should drive rates lower this new week.
The Open Buy Back and Over Night rates opened the week lower at 5.3 per cent and 6.1 per cent respectively from the previous week’s close of 6.3 per cent and 7.2 per cent even as system liquidity settled at N182.1 billion.
However, both the OBB and OVN rates declined to 4.3 per cent and 5.3 per cent respectively last Wednesday while system liquidity plunged to N177.8 billion.
At the close of the week, the OBB and OVN rates printed at 17.6 per cent and 19.8 per cent respectively with system liquidity settling at N220.7 billion.
Last Wednesday, the CBN at the primary market auction (PMA) issued 91-day (Offer: N19.8 billion; Subscription: N30.61 billion; Sale: N19.8 billion), 182-day (Offer: N10.0 billion; Subscription: N31.11 billionn; Sale: N10.0 billion) and 364-day (Offer: N27.0 billion; Subscription: N56.5 billion; Sale: N27.0 billion) instruments.
The bills were issued at marginal rates of 1.20 per cent, 1.39 per cent and 3.19 per cent (vs. 1.20%, 1.50 per cent and 3.40 per cent in the previous week) for the 91-day, 182-day and 364day tenors respectively. Demand remained strong at the auction as instruments across the board were oversubscribed at 1.6x (91-day), 3.1x (182-day) and 2.1x (364-day).
Thursday saw the CBN conduct OMO auction worth N50.0 billion but issued a total of N45.4 billion across three tenors. The 103-day (Offer: N10.0 billion; Subscription: N5.6 billion; Sale: N5.6 billion) and 173-day (Offer: N10.0 billion; Subscription: N9.8 billion; Sale: N9.8 billion) bills were undersubscribed at 0.6x and 0.9x with stop rates of 4.92 per cent and 7.74 per cent respectively.
On the flip side, demand was strong for the 341-day (Offer: N30.0 billion; Subscription: N79.1 billion; Sale: N30.0 billion) instruments with a bid-to-cover ratio of 2.6x and a marginal rate of 8.94 per cent.
In the secondary treasury bills market, the performance was bullish as average yield across benchmark tenors trended lower by 18 basis points week on week to close at 1.8 per cent. The 180-day note enjoyed the most demand, resulting in an average yield decline to 1.2 per cent (vs 2.0% in the previous week). However, the 91 and 364day bills closed the week flat.