Rates Hike Anticipated as CBN Sets to Auction Treasury Bills
Market anticipates spot rates hike as the Central Bank of Nigeria (CBN) is set to launch its midweek primary market auction for Nigerian Treasury bills. The CBN is set to conduct its first Treasury Bills auction for the month on Wednesday across standard tenors -91-day, 182-Day and 364-day.
The midweek auction will be led by the Debt Management Office (DMO), and some fixed interest securities analysts are expecting rates repricing to match the CBN energy on juicy rates offered to foreign portfolio investors on its OMO bills.
Amidst unattractive yields on Treasury bills, the total offer size of ₦480 billion will be offered to investors at the main auction, split across three maturities. The CBN will offer Nigerian treasury bills with 91 days expiration worth N50 billion at the auction.
In addition, the authority will open auction for treasury bills with 182 days maturity worth N80 billion. Offer size of N350 billion is proposed for Nigerian treasury bills with 364 days maturity.
In its commentary note, AAG Capital Limited said higher cut off rates are expected at the auction due to the sizeable amount on offer, which could see the Debt Management Office print up to N450 billion on the 1-year paper alone.
Analysts added that short-term yields have repriced along the curve and up 150 bps over the past month due to renewed supply at the OMO window by the CBN. According to AAG Capital Limited, this has left Nigerian Treasury bills unattractive to local investors amidst inflation concerns and consistent policy rate at 27.50%. CBN Sells Additional OMO Bills to Investors at 26.49%
