Yield on Nigerian Treasury Bills Falls as CBN Cuts Rates
The average yield on Nigerian Treasury bills fell to 17.67% as investors continue to take positions in fixed interest securities amidst reduced spot rates offered at the primary market auction last week.
The Central Bank of Nigeria (CBN) offered bills worth N290.00 billion at the primary market auction conducted last week across standard tenors. The offer size was split into N50.00 billion for Nigerian Treasury bills maturing in 91 days, N20.00 billion for the 182 days, and N220.00 billion for the 364 days bills.
In their separate notes, investment banking firms reported that total subscription levels settled at N675.66 billion, which represents a sharp reduction compared with N1.33 trillion bids received at the previous auction.
The Treasury bills auction resulted to bid-to-offer ratio of 2.3x, down from 6.6x previously recorded. The auction closed with the CBN allotting exactly what was offered. The authority’s offer was split into N13.11 billion for Nigerian Treasury bills maturing in 91 days, N5.10 billion for the 182 days, and N271.79 billion for the 364 days papers.
The CBN axed spot rates across standard tenors – 91 days bill was priced at the spot rate of 15%, 74 basis points below previous discount rate. Also, the Nigerian Treasury bills maturing in 182 days was sold to investors at the rate of 15.50%, 70 basis point below previous offer. For 364 bills, the CBN offered 15.88% as spot rate, down from 16.30%.
The CBN allotted N290 billion in treasury bills to investors out of a total subscription of N675.66 billion and rejected excess demand. Hence, investors sought to fill lost bids at the secondary market, pushing yields downward across the short, mid, and long end of the curve.
The post-auction momentum, supported by cautious investor sentiment, drove moderate buy-side activity, resulting in an 12 basis points decline in the average benchmark, settling at 17.76%.
The sharp drop in Treasury bill yields at the mid-week auction—seen as a direct consequence of interest rate cut expectations—prompted a wave of portfolio reassessments, particularly in light of the Monetary Policy Committee’s (MPC) decision to maintain the status quo on all policy parameters.
The average yield across all instruments contracted as investors maintained bullish momentum on the naira asset amidst a sustained rally in the equities market segment. At the OMO bills segment, the average yield declined to 24.7%.
Analysts said yield will reduce further on the expectation that the liquid financial system will bolster further bullish sentiments in the Treasury bills secondary market as investors continue repricing yields downwards, aided by a shorter supply of instruments. # Yield on Nigerian Treasury Bills Falls as CBN Cuts Rates Short-Term Rates Ease as Banks Deposit Excess Fund with CBN
