Interest Rate on Nigerian Treasury Bills Rises to 21.24%
The spot rate on Nigeria’s 364-day Treasury bills instrument rose to 21.24% at the primary market auction (PMA) conducted by the Debt Management Office (DMO) on behalf of the Central Bank last week
The rate surge was to boost investors’ interest in naira assets ahead of inflation data this week. At auction, the DMO offered N166.11 billion for refinancing. The offer bucket was split into N27.11 billion for the 91-day bills, N1.49 billion for the 182-day bills, and N137.50 billion for the 364-day Nigerian Treasury bills.
Citing auction results, fixed interest securities analysts said aggregate subscription settled lower at N308.66 billion, translating to a bid-to-offer of 1.9x compared to the previous auction. According to analysts, investors had sought to pump in a significant amount at the previous auction with a total subscription of N773.98 billion, which resulted in a bid-to-offer of 3.4x.
DMO allotted bills worth N207.27 billion to investors, resulting in lost bids that later filtered into the secondary market. According to auction results, the authority allotted NGN28.47 billion for the 91-day bills to investors and market participants. Also, the DMO allotted NGN9.16 billion for the 182-day bills to authorised dealers and NGN169.64 billion for the 364-day papers.
Rates were steadied at the short end and belly of the curve, according to primary market auction resulted. The results revealed the authority priced 91-day bill at spot rate of 16.33%, the same rate offered at the previous auction.
Spot rate pricing for 182-day treasury bills was also steadies at 17.44%, the same rate offered at the previous auction. The authority raised spot rate on 364-day treasury bills to 21.24% from 20.68%.
In the secondary market, bearish sentiments persisted following notable sell pressures on mid-dated papers amid pockets of post-auction demand from participants who lost out at the primary market auction last week, Cordros Capital Limited told investors in a note.
At the close of business, the average yield across all instruments expanded by 32 basis points to 23.7% as investors offloaded naira assets in the secondary market in a bid to boost liquidity levels in the financial system. Following the selloffs, the average yield advanced by 57 basis points to 23.3% in the Treasury bills space but contracted by 11 basis points to 24.2% in the OMO bill segment.
“We expect mixed activities in the Treasury bills secondary market, as the modest liquidity in the financial system might be insufficient to drive strong demand for bills and cause yields to fall significantly,” Cordros Capital Limited said in its update. #Interest Rate on Nigerian Treasury Bills Rises to 21.24% Interest Rate on Nigerian Treasury Bill Spikes to 21.45%
