Yield Swerves as CBN Sells Treasury Bills at 14.50%
Nigerian Treasury Bills

Yield Swerves as CBN Sells Treasury Bills at 14.50%

The average yield on the Nigerian Treasury Bills (NTB) swerve as the Central Bank sold 364-day bills for 14.50% at the primary market auction (PMA) conducted last week. This translates to a 150 basis point increase above the spot price offered in the previous auction when it settled at 13%.

While spot rates rise, the subscription level was unimpressive amidst tight liquidity in the financial system – short-term rates still remain heavily priced in the double-digit zone though there was an inflow into key market segments, according to data.  

Analysts said the financial system liquidity opened the week lower at ₦197.5 billion from the previous close of ₦332.7 billion as open buyback and the overnight rate remained steady at 16.3% and 16.5% respectively, according to Afrinvest.

MarketForces Africa reported that there was an inflow from bond coupon, OMO and T-bills maturities worth ₦69.5 billion, ₦30.0 billion and ₦240.3 billion respectively; boosting system liquidity to ₦357.1 billion at the end of the week.

Despite that N30 billion matured via the Open Market Operation (OMO), the market saw a strain in financial system liquidity and a resultant rise in NIBOR for overnight funds, 3 months and 12 months rose to 2 to 9.84% (from 9.76%), 11.14% (from 11.13%) and 16.73% (from 16.63%), respectively.

Consequently, the OPR rate fell 17 percentage points week on week to 16.2% while the overnight lending rate remained unchanged at 16.5%. At the CBN auction, investors’ interest was weak as all tenors were undersubscribed with bid-to-cover ratios settling at 0.07x, 0.18x and 0.83x. 

The auction result showed that CBN allotted N240.26 billion worth of T-bills which was noted to outweigh the N145.11 bills that matured via the primary market to investors at higher stop rates for all maturities. READ: CBN Sells Nigerian Treasury Bills at 13% to Investors

Afrinvest sees that as reflective of the low level of liquidity in the system that chased short-term government securities. Specifically, stop rates for 91- day, 182-day and 364-day bills rose to 6.50% (from 6.47%), 8.05% (from 7.90%) and 14.50% (from 13.00%) respectively.

For the 91-day with ₦31.7 billion CBN offer, the subscription was ₦2.1 billion. The spot rate on the Treasury bills was priced at 6.5%. For 182-day bills, CBN offered ₦58.2 billion but the subscription level printed very lower at ₦10.6 billion at 8.1% spot price.

For 364-day, the apex bank offered to sell bills worth ₦150.3 billion but received ₦97.3 billion as a subscription with a stop rate of 14.5%.  In the treasury bills secondary market, the performance was bullish as the average yield across benchmark tenors trended lower, down 100 basis points to close at 11.4%.

Traders said the average yields across instruments fell especially at the medium and long end of the curve due to retail demand despite little volumes.  The medium-term instrument enjoyed the most buying interest as yields declined 224 basis points week on week to 8.4% while the long-term instrument dipped 74 basis points to 14.7%.

Similarly, the short-term instrument recorded mild gains as the yield fell 2 basis points to 11.2%. Afrinvest expects that the CBN would maintain its mop-up operations, especially as OMO maturities worth ₦20.0 billion would hit the system. Also, analysts envisage system liquidity will remain elevated driving rates lower in the secondary T-Bills market. # Yield Swings as CBN Sells Treasury Bills at 14.50%

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