T-bills yields shrink to 2% as investors post record N493bn unsuccessful bids

… real return dips further to -12.71 in September

More than N493 billion worth of unsuccessful transactions were 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 excess liquidity drags for limited investments instruments.

With the shortage in attractive investment opportunities in Nigeria amid the low yield environment, fixed-income investors who participated in T-bills auction were more concerned about their exposure to risk than the return on their investment, as they offer rates lower than the double-digit inflation rate.

“There is strong liquidity in the market but not enough investment vehicles,” Ayorinde Akinloye, a research analyst at CSL Stockbrokers, said.

Investors bid at rates as low as 0.79 percent, 1 percent and 1.6 percent on the 91-day, 182-day and 364-day bills, respectively.

Subsequently, the apex bank settled it stop rates at 1 percent for both the 91-day, and 182-day maturities, and 2 percent for the longer 364-day instrument, a further drop from the previous stop rates of 1.08 percent, 1.49 percent and 2.8 percent recorded in the previous auction.

With a 30-month-high inflation rate at 13.71 percent in September, return on investment for T-bills plunged to -11.71 percent for the 364-day instrument and -12.71 percent for both the 91-day and 182-day maturities.

The stop rates reported in the auction results from the Nigerian treasury bills primary market for the week, 14, October 2020 is the least BusinessDay has reported since it started tracking the data in August 2016.

“Stop rates dipped significantly across all tenors on high system liquidity,” Ayodeji Ebo, senior economist/head, Research & Strategy, Greenwich Merchant Bank, said.

Analysis of the market result seen by BusinessDay shows that investors jostled for the N124.89 billion the CBN sought to raise at the auction with N618.09 billion, meaning investors oversubscribed by a whopping N493.21 billion, the highest BusinessDay has tracked so far.

“Opportunities to put money into right now are limited,” Obinna Uzoma, chief economist at EUA Intelligence, said, adding that more money was therefore parked into T-bills.

While investors were willing to subscribe to the 91-day instrument with N33.04 billion, the CBN only allotted N12.76 billion, meaning N21.04 billion was recorded as unsuccessful bids.

Further analysis of the auction result reveals that the 182-day medium-term paper was oversubscribed by almost 10 times as N40.23 billion bids were reported to be unsuccessful. While the central bank raised N4.50 billion in the 182-day instrument investors were ready to subscribe with N44.73 billion.

Also, the apex bank sold N107.62 billion worth of bills for the 364-day paper, five times less the amount investors were willing to invest for the instrument.

Investors jostled with a subscription worth N540.32 billion and thus, N432.7 bounced back as unsuccessful bids.

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