Higher Rate on 364-Day Treasury Bill Boosts Investors’ Appetite
After the spot rate on one-year bills was raised by 50 basis points to 23.50% at the primary market auction last week, investors’ desire for Nigerian Treasury bills surged in the secondary market.
The market had opened on a mixed note with bearish experience but a midweek auction. Huge unmet bids at the primary market auction triggered a rush of buying interest in the secondary market.
The 364-day Nigerian Treasury paper was highly in demand in the secondary market after auction by investors that lost their bids. The Debt Management Office (DMO) offered N610.80 billion at the auction across the 91-, 182-, and 364-day tenors, receiving N1.17 trillion in total subscriptions.
Despite midweek liquidity constraints, the 364-day bill attracted significant interest, with a bid-to-cover ratio of 4.5x. The DMO allotted N693.05 billion, with the 364-day bill commanding 92% of the total issuance.
The stop rate for the 364-day tenor rose by 50 bps, reaching a record yield of 30.67%, the highest since the inception of DMO issuances. The Treasury bills market started off calmly but with bearish sentiment as investors focused mainly on the Treasury bills auction that happened midweek.
The DMO Treasury bills offer were split into N41.89 billion for the 91-day, N28.56 billion for the 182-day, and N540.45 billion for the 364-day bills.
Subscription level settled higher at N1.18 trillion as investors double down bets versus N669.93 billion staked in the previous auction, resulting in a bid-to-offer ratio of 1.9x.
The auction closed with the DMO allotting instruments worth N693.05 billion, split as N35.41 billion for the 91-day, N16.92 billion for the 182-day, and N640.71 billion for the 364-day papers.
The stop rates for the 91 and 182-day papers remained unchanged at 18.00% and 18.50%, respectively, while the rate for the 364-day paper increased by 50 bps to 23.50%.
Post-auction, unmet demand spilled into the secondary market, driving concentrated buying activity on the newly issued 364-day bill, TrustBanc Financial Group said in a report.
Following the auction, there was notable buying interest in the newly issued 1-year paper, with trades occurring between 22.70% and 22.90%. The average benchmark yield, as reported by FMDQ, declined by 11 bps week-on-week, closing at 24.24%.
Fixed income market analysts expect to see continued interest in the newly issued 1-year paper, albeit with caution, as participants will focus on the final MPC meeting for the year. All told, the average yield contracted by 12 bps to 24.0% at the NTB segment but expanded by 77 bps to 27.2% at the OMO segment.
Analysts said they expect investors to reprice bills in line with the outcome of the monetary policy committee meeting scheduled for the new week. #Higher Rate on 364-Day Treasury Bill Boosts Investors’ Appetite Naira Plunges on Suboptimal FX Intervention
