The Central Bank of Nigeria (CBN) recorded the most sales in its N300 billion Open Market Operation (OMO) offered to investors on Thursday.
Consequently, the OMO sales of various tenor bills increased by 14.89 percent to the sum of N344.38 billion from initial offer of N300. The N30 billion and N200 billion offered for the short (91-day) and longer term (364-day) respectively were oversubscribed and sold while the median term instrument was undersubscribed.
Ayodeji Ebo, managing director, Afrinvest Securities Limited explained that the OMO auction rates have continued to attract investors attention due to its attractiveness relative to the the secondary market.
He said the long term bill was prorated by 69.9 percent due to the high subscription level. Due to huge maturities for the rest of the year, we expect the CBN to accelerate its frequency of OMO Auction to keep System liquidity in check.
Total subscription for the 364-day OMO instrument stood at N385.47 billion while the CBN sold the sum of N250 billion at a stop rate of 13.5 percent. Investors earlier bid at a range between 13.5 and 14 percent for the offer which matures on September 10, 2020.
The CBN offered N70 billion for 182-day tenor but sold only N8.97 billion at 11.79 percent stop rate. The bill was undersubscribed at N20.97 billion at investors preferred bid range of between 11.78 and 13 percent. The maturity date is fixed at March 12, 2020.
For the 91-day OMO bill, which matures on December 12, 2019, the CBN sold a total of N85.41 billion out of the N30 billion initial offer, at a stop rate of 11.59 percent. Investors subscription rose to N85.41 billion at a bid range of between 11.50 and 11.59 percent.
The Nigerian financial market was last week awash with liquidity from maturing Treasury Bills and Open Market Operation (OMO), with attractive yields.
A breakdown of the system liquidity shows that the Central Bank of Nigeria (CBN) will on Wednesday rollover N158.7 billion worth of maturing T-Bills at the Primary Market Auction. This consists of N15.00 billion for 91 day tenor, N14.002 billion for 182 day tenor and N129.65 billion for 364 day tenor. And also inflows from maturing OMO bills worth N300. billion is expected to hit the system thereby bolstering system liquidity.
The yield for short-term bills offered by some investment firms as at Monday last week ranged between 10.31 and 10.47 percent per annum. For medium-term instruments, the yield ranged between 12.01 and 12.32 percent, while the yield for longer-term bills stood at between 13.47 and 13.71 percent per annum.
Yield refers to income realized on an investment over a particular period of time, while stop rate refers to stop rate refers to the maximum interest rate preferred/issued by the CBN out of all the bids submitted within a bid window.
The previous week saw further increase in demand in the Treasury Bills secondary market as system liquidity remained elevated at about N862.2 billion positive as at Thursday, amidst the OMO auction that was conducted by the Apex bank on the same day. Although, system liquidity opened the week negative N68.0 billion spurring sell offs, liquidity from matured OMO bills bolstered demand across the yield curve during the remaining trading sessions of the week.
Consequently, yields remained pressured as average yield across tenors dipped further by 51bps Week-on-Week to settle at 13.3 percent on Friday from 13.8 percent the previous week. Major buying interests were witnessed at the short and medium end of the curve, particularly, 24-Oct-19 (-126bps), 10-Oct-19 (-126bps) and 12-Dec-19 (-111bps) maturities.
Last week Thursday, the CBN mopped-up a total of N322.6 billion out of the initial N400 billion offered to investors via OMO auction.
Investors scrambled for the longer tenure instrument as the 364 day tenor OMO bill was oversubscribed by 63.25 percent. The initial offer for this tenor was N250 billion while the total subscription stood at N408.12 billion.
The CBN sold a total of N321.48 billion (364 day) at a stop rate of 13.50 percent. The investors bided at a range bid of between 13.49 and 14.50 percent for the offer which matures on September 3, 2020.
Hope Moses-Ashike
