CBN Crashes Rates as Investors Oversubscribe OMO Bills Offer
The Central Bank of Nigeria (CBN) crashed spot rates on its open market operation bills at the primary market auction conducted last week. The decline in spot rates registered across tenors was supported by increased subscription levels by investors.
The apex bank is offering higher rates on OMO bill auctions than associated interest rate payments on Treasury bill instruments in a bid to attract foreign investors into the market. Due to negative interest yield on naira assets, foreign portfolio investors have reduced significantly.
Meanwhile, following lost bids in the primary market, investors moved to the secondary market to balance their fixed interest securities portfolio requirement. An increased demand for OMO bills in the space dragged yield down by a basis point to 8.4% in the OMO bills secondary market.
At the OMO auction conducted last week, the CBN offered N300.00 billion, split as N75.00 billion of the 92-day, N75.00 billion of the 183-day, and N150.00 billion of the 365-day bills.
Traders and market participants said the total subscription at the auction settled at N520.10 billion – which signified an increase in demand from the previous auction which registered a total subscription of N414.20 billion.
Hence, the auction’s bid-to-offer ratio settled at 1.7x. The CBN allotted N300.00 billion to market participants amidst an effort to manage liquidity in the economy. Market analysts reported that the offer was split as N15.00 billion for the 92-day, N15.20 billion for the 183-day, and N270.00 billion for the 365-day.
Further detail indicated that spot rates plunged as increased demand allowed downward repricing. Details from the OMO auction showed that stop rates for 92-day bills were sold at 10.00%, which was 50 basis points below the previous rate of 10.50%.
Also, 183-day OMO bills attracted a 13.50% spot rate which represents a 50 basis points decline from 14.00% offered at the previous auction and 365-day bills were sold at 17.50% versus the spot rate of 17.75% at the previous auction.
This week, CBN is expected to conduct a Nigerian Treasury bills primary market auction to roll over N231.82 billion worth of maturities. #CBN Crashes Rates as Investors Oversubscribe OMO Bills Offer Naira Steadies as Banks Issue Update on FX Purchase

