The average yield on Nigerian Treasury Bills continues to fall rapidly amidst a sustained rally across the tenor.
Yield tumbles to 1.5 per cent across the tenor following a large decline in spot rates offered by the Central Bank of Nigeria (CBN) at the primary market auction last week.
The auction result indicated that CBN allotted T-bills worth N220.53 billion to fully refinance the N198.34 billion worth of matured Treasury bills. The demand came stronger than anticipated, forcing lower spot rates across 91-day, 181-day and 364-day bills.
The sum offered to investors was split into N1.74 billion for the 91-day, N1.26 billion for the 182-day, and N217.53 billion for the 364-day bills. Investors’ total demand was valued at N959.39 billion against CBN offer worth N220.53 billion while demand for longer-dated bills was valued at N860.35 billion – 89.7 per cent of the total subscription.
The apex bank allotted exactly the sum it offered for sale, thus stop rate for all of the maturities declined. Specifically, 364-day bills fell further to 4.78 per cent from 7.30 per cent. Also, 91- day bill and 182-day bill rates fell to 0.29 per cent from 2.00 per cent and 1.80 per cent from 4.33 per cent, respectively.
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Due to large liquidity in the market, CBN also mopped up funds via open market operation, according to analysts’ notes. The apex bank auctioned N14 billion worth of bills, which was less than the matured OMO bills worth N40 billion.
On account of unmet subscriptions at the CBN auction, investors shift attention to the secondary market to lock down funds in Treasury instruments amidst a high inflation rate reading which printed at 21.34 per cent in December 2022.
The bullish run in the Treasury bills market dragged the yield curve lower. Thus, the average yield across all instruments dipped by 160 basis points to 1.8 per cent, according to Cordros Capital analysts’ note.
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