Money Market: Rate Trends Lower in Secondary Market

This past week, the OBB and OVN rates opened the week at 6.2% and 6.3% respectively, lower than 9.0% and 9.8% recorded at the close of the previous week despite system liquidity falling to ₦134.2bn from ₦1.4tn. On Wednesday, the OBB and OVN rate fell to 1.0% and 1.6% due to increased system liquidity from OMO maturities. Furthermore, on Friday, the OBB and OVN rate closed the week at 1.0% and 1.3% respectively as system liquidity rose to ₦699.7bn.

On Wednesday, the CBN at the primary market auction (PMA) issued 364-day (Offer: ₦694.9bn; Subscription: ₦93.9bn; Sale: ₦140.9bn), 182-day (Offer: ₦41.6bn; Subscription: ₦6.0bn; Sale: ₦4.5bn) and 91-day (Offer: ₦84.9bn; Subscription: ₦49.8bn; Sale: ₦7.5bn) instruments at a marginal rate of 0.98%, 0.50% and 0.34% respectively, lower than 1.0%, 1.0% and 2.0% at the previous auction. Demand remained strong at the auction as instruments across board were oversubscribed at 1.7x (91-day), 3.9x (182-day) and 7.4x (360-day) respectively.

In the secondary treasury bills market, performance was mildly bullish as average yield across benchmark tenors trended lower, down 5bps w/w to close at 0.6%. At the close of the week, the mid-term instrument enjoyed the most buying interest as the average yields declined 22bps w/w to 0.4% while yield on the short and long-term instruments rose 2bps and 4bps w/w to 0.5% and 0.8% respectively. In the coming week, we expect the CBN to sustain its liquidity intervention as OMO worth ₦246.0bn would hit the system. We expect rates in the secondary T-Bills market to compress further on the back of higher demand.