FPIs, Banks Stake Huge Bets on OMO Bills
Nigerian banks and foreign portfolio investors (FPIs) stake huge bets totalling N1.6 trillion on OMO bills at the two primary market auction conducted by the Central last week.
The two market auction conducted by the monetary authority was met with significant investors’ interest seeking to park fund in short term investment options, according to analysts.
Again, the apex bank reduce spot rate one on OMO bill with one year maturity where investors saw most value, and stake huge bets amidst relatively high interest rate.
According to a note by Cordros Capital Limited, the total subscription level at the first auction was N891.46 billion, higher than N86.50 billion recorded in July.
Analysts noted that the CBN offered instruments worth N500.00 billion, more than 3x N150.00 billion offered in July for subscription. Eventually, the CBN allotted N869.46 billion.
The breakdown showed that the standard maturities offer was split as N5.00 billion for the 92-day, N10.00 billion for the 176-day, and N854.46 billion for the 358-day.
Stop rate for 92-day OMO bills was 18.5%, according to auction results. The CBN offered rate for 176-day OMO bills was 19.3% while 358-day OMO bills was priced at 21.89%, 2 basis points.
At the second auction, participants were mostly interested in the 1-year bill offered, with zero interest recorded for the 91-day bill.
The total subscription level printed N765.00 billion amid N1.85 trillion worth of bills on offer.
Accordingly, the CBN allotted N758.00 billion for the 364-day at a stop rate dropping by 2 basis points 21.87%, while no sales were made on the 91-day and 175-day bills.
In 2019, the CBN exclude non-bank locals (individuals and corporates) from participation in its Open Market Operations (OMO) at both the primary and secondary market.
CardinalStone Partners explained that the exclusion implies that only Deposit Money Banks (DMBs) and Foreign Portfolio Investors (FPIs) can participate in OMOs, while everyone else, including non-bank financial institutions, will have to shift focus to T-bills and other investment options. #FPIs, Banks Stake Huge Bets on OMO Bills
