After the monetary policy committee cut rates by 50 basis points, investors would have expected yields on government securities to fall but after fresh open market operations by the Central Bank of Nigeria concluded on Wednesday, the average treasury bills yield advanced marginally by 0.003 percent at the end of the day’s trading to 12.86 percent.
Ayodeji Ebo, managing director of Afrinvest Securities Limited, explained on his Twitter account that “there was an OMO Auction a day before which included long term bill. This was oversubscribed; hence investors were not too aggressive to get their orders filled yesterday. However, Govt needed to raise funds so were forced to increase rates to meet this objective.”
Fresh treasury bills valued at N95.7 billion were sold to investors on Wednesday by the Central Bank of Nigeria (CBN). The exercise, conducted via primary market auction, was largely successful as it was oversubscribed to by market players. Of the N95.68 billion worth of the debt instrument auctioned at the exercise, offers worth N197.05 billion were received by the apex bank, which did the auctioning on behalf of the Nigerian government.
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CBN had also auctioned N17.60 billion worth of the 182-day bill, but received subscriptions worth N22.97 billion, with only N17.60 billion sold. Of the N68.08 billion worth of the 364-day bill auctioned, the central bank received offers worth N153.99 billion, with N68.08 billion allotted.
While the CBN slightly reduced the stop rate for the 91-day bill to 10.29 percent from 10.30 percent, rates for the two other maturities were increased. The 182-day bill rate was raised from 12.20 percent to 12.60 percent, while the 364-day bill rate was increased from 12.35 percent to 12.85 percent.
It was observed that the focus on the primary market auction left the secondary market slightly bearish as a result of tight system liquidity levels. Consequently, the average treasury bills yield advanced marginally by 0.003 percent at the end of the day’s trading to 12.86 percent.
IFEANYI JOHN
