CBN Slashes Treasury, OMO Bill Rates at Main Auctions
The Central Bank of Nigeria (CBN) has further slashed spot rates on short term borrowing instruments as investors continue to park funds in money market assets. The average yield on short term investment options declined further in the financial markets due to investors’ aggressive demand following the inflation rate slowdown.
The average yield on Nigerian Treasury bills declined due to sustained demand across tenors in the secondary market. The market witnessed similar buying interest in the OMO bills segment. The demand for these naira assets dragged yield lower as the market expected inflation to ease in August, but with mixed feelings on the consumer price index trajectory thereafter.
Last week, analysts said Treasury bills secondary market traded on a bullish note owing to pockets of post-auction demand from participants who lost out at the midweek auction sales. As a result of buying momentum, the average yield in the market declined by 103 basis points to 20.8%.
Across the market segments, the average yield dipped by 154 basis points to 19.7% at the Treasury bills segment and inched lower by 17 basis points to 22.7% at the OMO segment.
Nigerian Treasury Bills Auction Outcome
At the primary market auction conducted last week, the Debt Management Office (DMO) on behalf of Central Bank of Nigeria (CBN) offered participants instruments worth N233.31 billion across standard maturities. The Treasury bills auction breakdown showed that the debt office offer N19.61 billion for the 91-day, N10.55 billion for the 182-day and N203.15 billion for the 364-day bills.
Auction results showed that demand came strong. Notably, aggregate subscriptions at the auction settled at N1.13 trillion with bid-to-offer ratio of 4.8x, higher than the N1.03 trillion recorded at the previous auction.
Eventually, the DMO rolled over the exact maturing bills worth N233.31 billion. The midweek auction result showed that the authority allotted N7.86 billion for the 91-day, N1.99 billion for the 182-day, and N223.46 billion for the 364-day papers.
The rates on all the standard maturities bills were sliced, a development that was partly supported by a decline in the inflation rate in the economy in July. The stop rate on 91-day bills declined to 17.00%, down by 120 basis points from 18.20% at the recent past auction.
Also, the stop rate on 182-day bills declined to 17.50%, down by 170 basis points from 19.20%. At the longer end, the spot rate on 364-day bills plunged to 18.94%, 196 basis points below the previous rate of 20.90%. At the same time, the CBN also conducted an OMO auction where the authority offered N500.00 billion worth of instruments across standard maturities.
The CBN sought to raise N25 billion from 85-day OMO bill sales, N25.00 billion for the 183-day OMO bills, and N450.00 billion for the 365-day. Again, demand was strong, separate analysts said in their respective market notes.
Total subscription settled at N678.00 billion with a bid-to-offer ratio of 1.3x, according to Cordros Capital Limited. At the end of the session, the CBN raised N459.60 billion from 365-day at a stop rate of 21.8%, a marginal decline when compared with 21.9% offered at the previous auction.
The short and mid-tenor, or the 85-day and 183-day bills, closed without sales. In August, the CBN raised N626.1 billion from Treasury bills auctions, a 41% increase compared to the previous month’s issuance. Strong investor interest resulted in total subscriptions reaching N1.51 trillion, particularly skewed towards longer maturities, as investors sought to lock in rates in anticipation of future yield declines. CBN Defends Naira with $39m in Forex Market
