• Thursday, March 28, 2024
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BusinessDay

T-Bill rates crash to 4-year low as investors place N383bn in failed bids

Nigeria’s inflation leaves T-Bills investors with little to cheer

Fixed-income investors seeking high-yielding securities in the light of the prevailing developments in the markets have once again been disappointed, as attempts to buy the federal government short-term debt instruments at attractive rates were denied.

More than N383.3 billion worth of failed transactions was recorded at the Nigerian Treasury Bills (T-Bills) auction conducted Wednesday by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN) as investors bid at rates as high as 12 percent, 11.5 percent and 14.4 percent on the 91-day, 182-day and 364-day bills.

Subsequently, the apex bank lowered rates across the three tenors to 6.495 percent, 7.23 percent, and 8.37 percent, respectively. While the rates are the lowest since January 6, 2016, they compare with 7.8 percent, 9 percent and 10 percent they cleared on the 91-day, 182-day and 364-day bills at the previous T-Bills auction which saw rates crash to a single digit for the first time in 3 years.

Investors jostled for the N150.6 billion the CBN sought to raise at the auction with N533.9 billion, causing about three-quarters of the total bids to fall beyond the CBN’s interest rates band, according to the auction result seen by BusinessDay.

A breakdown of the result reveals that even though interest for the debt instruments waned when compared with the previous primary market auction, the Wednesday’s sale was oversubscribed by more than 3.5 times with most demand on the 182-day paper.

The CBN sold N20.37 billion worth of bills for the 91-day paper, N19.16 billion worth of bills were allotted on the N182-day paper, while bills valued at N111.07 billion were sold on the 364-day paper.

The Nigerian government plans to cut its cost of borrowing and ramp-up its revenue collection haven consistently failed to meet its targets in the past half a decade. To achieve this, the country’s central bank crashed interest rates on T-Bills to single digit in the last auction after restricting local corporate and individual investors from patronising its OMO bills.

Performance at the secondary market was bullish following Wednesday’s Nigeria T-Bills auction as buy interest was witnessed across some selected short-dated maturities including Jan-02-2020 and Apr-16-2020bills, a move analysts say could continue as investors with failed bids may scramble for bills at the secondary market.

The average benchmark discount rates dropped some 121 basis points to close at 7.58 percent. “We could associate this sentiment to the effect of the primary market auction as investors displayed interest for maturities with attractive yields having seen the stop rate lowered further at the auction,” analysts at Lagos-based Greenwich Trust Limited said in a note to clients.

A similar trend was observed in the bond segment of the fixed-income market, as the average yield on benchmark bonds moderated to 12.23 percent driven by buy interest across various tenors of the curve.

Meanwhile, liquidity in the nation’s financial market fell to N337.58 billion as of the close of business Wednesday from N349.73 billion recorded in the preceding day.