The Central Bank of Nigeria (CBN) sold N678 billion worth of Treasury bills (T-bills) in its latest auction, despite total investor subscriptions reaching N1.27 trillion, highlighting strong demand amid tight market liquidity.
At the NTB PMA auction conducted by the Debt Management Office (DMO) recently, the yield spiked to 22.52 percent from 21.68 percent due to tight liquidity.
This is a deviation from past auctions, where yields have been in constant decline in response to the rebased inflation rate of 24.48 percent from 34.8 percent, coupled with expectations of further moderation in the year.
The market on Monday had a liquidity net deficit of N98.65 billion, and a lower maturing profile compared to the offer size of N162 billion vs. N550 billion also fueled the tight liquidity state.
However, demand for the one-year bill remained high at N1.19 trillion, although lower than the N1.8 trillion of the previous auction.
Overall, the CBN sold only N678 billion worth of the N1.27 trillion subscription it received.
Furthermore, the 182-day and 91-day Treasury bills saw minimal interest from investors. Only N34.72 billion of the N70 billion 91-day bill was sold. Likewise, for the 182-day bill, only N36.23 billion was sold.
Yields on the 182-day bill also increased to 19.52 percent from 19.48 percent, while that of the 91-day bill remained at 17.75 percent.
Analysts, while reacting to the performance, noted that the shift indicates that despite easing inflation, tight market liquidity and high government borrowing needs are pushing rates up, making Nigerian T-bills more attractive to investors.
However, they said the continued foreign investor exits and lower oil revenue may influence future yield trends.
Analysts at Meristem had projected in an earlier report that stop rates for the offered instruments would likely inch upward.
“A marginal uptick in rates remains possible due to the liquidity condition and the high paper supply. Moreover, with the market’s recent bearish performance, likely due to foreign investors’ exit amid lower oil prices, market players may tilt towards higher rate expectations,” they said.
Since the last auction, the secondary T-bills market has remained largely bullish, driven by strong investor demand for attractive yields and poor liquidity.
For their part, analysts at Cordros Research said they expect yields to further decline, underpinned by the continued downward repricing of yields and investors looking to fill unmet bids at next week’s market auction. Sun