Demand for Nigerian Treasury bills fell sharply at the latest auction as investors shifted more attention to Open Market Operations (OMO) securities offering higher returns.
Total subscriptions dropped 58 percent to N1.77 trillion at the October 7 auction, compared with N4.23 trillion recorded at the previous auction on September 23. The bid-to-cover ratio also fell from 8.46 times to 1.97 times. (FMDA)
The weaker demand came as the Central Bank of Nigeria (CBN) continued to offer relatively higher yields on OMO bills following its decision to cut the Monetary Policy Rate (MPR) by 350 basis points to 23 percent in September.
OMO bills attract stronger investor interest
At its October 6 OMO auction, the CBN offered N2 trillion across 147-day and 182-day instruments and received N3.51 trillion in subscriptions.
The 182-day OMO bill attracted N2.69 trillion in bids, while the 147-day instrument received N817.95 billion. The CBN ultimately allotted N3.31 trillion.
The stop rates stood at 17.22 percent for the 147-day bill and 16.92 percent for the 182-day bill.
The 182-day OMO rate was 112 basis points higher than the 15.80 percent stop rate on the comparable Treasury bill, making the OMO instrument more attractive to investors. (FMDA)
Investors favour one-year Treasury bills
Despite the overall decline in demand, investors showed strong interest in the 364-day Treasury bill.
The instrument attracted N1.68 trillion in subscriptions against N700 billion offered. The Debt Management Office (DMO) allotted N885 billion, while the stop rate fell slightly to 15.85 percent from 15.89 percent at the previous auction. (Nairametrics)
Demand for shorter-term bills was considerably weaker. The 91-day bill attracted N39.42 billion against N100 billion offered, while the 182-day bill received N46.87 billion against the same N100 billion offer.
Their stop rates remained at 15.50 percent and 15.80 percent respectively. (FMDA)
Overall, the DMO allotted N968.47 billion at the auction, exceeding its N900 billion offer and nearly doubling the N497.59 billion raised at the previous auction. (FMDA)
Treasury bill yields continue to fall
The average secondary-market Treasury bill yield declined by 98 basis points to 17.48 percent on October 6, from 18.46 percent on September 23.
The three-month benchmark yield recorded the biggest decline, falling 158 basis points to 16.43 percent. Yields on one-month, six-month, nine-month and 12-month instruments also declined.
The 364-day Treasury bill stop rate has now fallen by 181 basis points from 17.66 percent in mid-July to 15.85 percent, reflecting lower short-term borrowing costs for the government. (FMDA)
Market participants say future Treasury bill yields will depend largely on system liquidity, the pace of CBN OMO issuances and signals from the next Monetary Policy Committee meeting.
SEO Title: Treasury Bill Demand Falls 58% as OMO Yields Rise
Meta Description: Treasury bill demand fell 58% to N1.77tn as investors favoured higher-yielding OMO securities, while DMO raised N968.47bn.
