The Central Bank of Nigeria (CBN) sold N162.72 billion worth of one-year T-bills, exceeding the amount initially offered due to a 300 percent oversubscription, totaling N431.58 billion.
Strong investor demand for one-year Treasury bills on Wednesday led to a decrease in their yield, which contracted to 28.02 percent from 28.36 percent recorded at the previous auction.
The stop rate at this auction also dropped to 21.89 percent, down from 22.1 percent in the last auction.
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Segun Adams, a research analyst at Afrinvest West Africa Limited, noted that the slight decline in the stop rate for longer-term bills highlights a shift in bargaining power in favor of the Debt Management Office (DMO), which issues these bills through the CBN.
“This shift is bolstered by the DMO meeting its 2024 domestic borrowing target within the first half of the year. At the same time, market participants are adjusting their expectations in anticipation of a potential peak in inflation and interest rates in the near term,” Adams explained.
Last month, the Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) by 50 basis points, moving it from 26.25 percent to 26.75 percent.
This increase was followed by a rise in the yield and stop rates of NT-bills at the auction immediately after the hike, with rates reaching 28.36 percent and 22.1 percent, respectively.
On Wednesday, the range of bids was between 20.50 and 24.99 percent, compared to a range of 20.00 to 26.77 percent at the previous auction. The CBN rolled over a total of N216.09 billion across the 91-day, 182-day, and 364-day tenors.
“I expected stop rates to be around 22 percent, but the range of bids influenced the CBN to lower the yield,” said Joshua Joseph, a fixed-income analyst at CSL Stockbrokers.
Joseph also pointed out that the market’s surplus liquidity contributed to the range of bids, contrasting with the previous auction, where liquidity was negative.
“Additionally, the rates are also influenced by the CBN’s comfort level,” he added.
According to data from the Central Bank of Nigeria, bank liquidity stood at N539.4 billion yesterday.
For the 91-day and 182-day T-bills, yields remained unchanged at 19.41 percent and 21.61 percent, respectively.
The CBN sold N20.74 billion worth of 91-day bills, slightly more than the auctioned amount, as it was oversubscribed by investors with bids totaling N21.82 billion.
For the 182-day NT-bills, N32.62 billion was sold, less than the N51.34 billion offered.
Overall, the CBN sold a total of N216.08 billion worth of bills, matching the amount offered at the Primary Market Auction across the 91-day, 182-day, and 364-day tenors.
