Savvy investors on Wednesday swooped on N208.59 billion Nigerian Treasury Bills (NTB) auctioned at the primary market by the Central Bank of Nigeria (CBN).
After the auction exercise, the government instrument consisting of 91-day, 182-day and 364-day tenors were oversubscribed following the attractiveness of rates in the secondary market.
The summary of the auction result shows that N24.37 billion was offered for 91 days at a stop rate of 11.10 percent, although investors earlier demanded a bid range of between 9.20 percent and 12.49 percent. The allotment date for all the instruments was fixed at August 29, 2019.
For the 182-day tenor, the CBN offered a total of N38.75 billion and it was oversubscribed by N46.15 billion. The range of bid rate stood between 11.00 percent and 15.00 percent. However, it was allotted at a stop rate of 11.58 percent.
The CBN offered N145.47 billion for 364-day tenor at a stop rate of 12.89 percent, and it was oversubscribed by N272.54 billion, as investors earlier bid at a range of between 11.89 and 14.31 percent.
Ayodeji Ebo, managing director, Afrinvest Securities Limited, explained that the improvement in rates at the Primary Market Auction (PMA) on Wednesday was due to higher rates in the secondary market.
The implication, he said, is that the cost of borrowing of the government has increased amid concerns of high debt service to revenue ratio.
Consequently, the overnight interbank rate, the rate at which banks borrow and lend from one another, increased to 12.79 percent on Wednesday from 12.30 percent.
The Open Buy-Back (OBB), which is the money market instrument to raise short-term capital, also increased by 0.43 percentage point to 11.86 percent on Wednesday from 11.43 percent the previous day, data from the FMDQ indicated.
Last week, the Treasury Bills at the secondary market sustained its bearish trend, attributed to tight system liquidity (N348.4bn short as at Friday) as well as sustained sell-offs by Foreign Portfolio Investors (FPI) following concerns of weakening global growth.
Consequently, average yield across all tenors advanced 130bps Week-on-Week to settle at 15.2 percent. Sell pressures were witnessed across all segments of the curve as average yield on the short, medium and long end of the curve rose 109bps, 65bps and 191bps W-o-W, respectively.
Last week Thursday, the CBN auctioned N110 billion via Open Market Operation (OMO) but investors rejected the offer, as their demand for higher rates was not met.
The OMO auction on Thursday resulted in a “no sale” following weak subscription levels – investors demanded for higher rates – across all tenors (N110.0bn offered vs. N19.4bn subscription) despite Federation Account Allocation Committee (FAAC) allocation of (N760.0bn) and OMO maturities (N45.7bn), which were unable to elevate liquidity level at the end of the week.
“We expect to see a boost in system liquidity on the back of maturities from T-Bills and OMO bills worth N208.0 billion and N393.3 billion, respectively. The CBN is also expected to mop up excess liquidity via OMO auctions. The T-Bills secondary market may sustain its bearish run as investors take position in the PMA offer and potential OMO offerings at more attractive yields,” Afrinvest analysts said.
Godwin Emefiele, governor, CBN, said recently in London that the regulator would offer more OMO auctions to counter the upcoming maturities due in September/October.
HOPE MOSES-ASHIKE
