Interest Rates on Treasury, OMO Bills Shrink at CBN Auctions
The monetary authority has started to price down rates on Nigerian Treasury, and OMO bills in the primary market amidst increasing demand for the naira assets.
The market awaits inflation data this week. Analysts are of the view that inflation condition will continue to impact asset pricing in the debt capital market.
In the fixed income segment, the real return gap has reduced to 4.9% after the monetary authority hiked the benchmark interest rate to 27.25% last month to combat inflation rate of 32.15%.
At the bi-weekly Nigerian Treasury bills auction, on behalf of Central Bank of Nigeria (CBN), the Debt Management Office (DMO) offered N81.90 billion worth of instruments to investors across standard maturities.
Last week, a total of N28.47 billion of 91-day bills was offered at the primary market auction conducted by the Apex Bank to investors seeking cover against inflation.
The CBN also opened N22.67 billion worth of 182-day Nigerian Treasury bills for subscription and N30.76 billion for the 364-day bills to market participants.
According to Cordros Capital Limited, aggregate subscription settled lower at N271.87 billion, translating to bid-to-offer of 3.3x, compared to the previous auction subscription level of N304.27 billion.
Eventually, the DMO allotted exactly the amount offered – N12.96 billion for the 91-day, N3.91 billion for the 182-day and N65.03 billion for the 364-day papers.
The auction results revealed that stop rate for 91-day treasury bills was priced at old rate of 17.00%, 181-day bills was sold to investors at the old rate of 17.50%.
Reflecting previous pattern before benchmark interest rate was adjusted upward, the CBN slashed rate on 364 day bills to 19.86% from 20%.
Also, the CBN also conducted an OMO auction offering instruments worth N300.00 billion across standard maturities to breeds of investors.
The Apex Bank opened bid for N25.00 billion for the 95-day OMO bills for subscription. The CBN also offered to sell N25.00 billion of 179-day OMO bills and N250.00 billion worth of 361-day OMO Bills to investors.
Investors maintained previous positioning pattern at the longer end of the curve. Total subscription settled at N908.23 billion, translating to bid-to-offer ratio of 3.0x.
The CBN allotted N905.23 billion for the 361-day OMO bills at a stop rate of 24.3% while no sales were made of the 95-day and 179-day OMO bills, Cordros Capital Limited said.
“Based on our expectation of a possible liquidity deficit in the coming week, we expect yields in the Treasury bills secondary market to trend higher, as participants in the market look to fulfil their funding needs”, the investment firm added. #Interest Rates on Treasury, OMO Bills Shrink at CBN Auctions
