Investors on Thursday shunned short and long term Open Market Operation (OMO) bills after the Central Bank of Nigeria (CBN) offered a total of N200 billion in the secondary market.
The reason as explained by Akintunde Olusegun, analyst from Polaris Bank, is that the investors bid at a higher rate than the CBN could offer.
However, investors oversubscribed the longer tenor bill as the total subscription stood at N407.60 billion, while the CBN offered a total of N180 billion for 362-day tenor instrument.
The offer, which matures on January 12, 2021 recorded a total sale of N201.25 billion at a stop rate of 13.20 percent after the investors bid at a range of between 13.11-13.23 percent.
For the 180-day tenor bill, the CBN offered a total of N10 billion but there was no sales. However, investors bid at a bid range of between 12.50-12.50. The offer which is expected to mature in July 14, 2020 recorded N1.50 billion subscription.
The CBN also offered N10 billion for the 82-day tenor instrument, which matures April 7, 2020 but there was no subscription and no sales.
Olusegun noted that there has not been much activities in the short and medium term bills, which accounts for the low or no demand by investors.
The Overnight (O/N) rate, which is the rate at which Deposit Money Banks (DMBs) borrow and lend to each other, declined by 9.10 percent to close at 5.07 percent, while the -Open Buy Back (OBB) rate, the money market instrument used to raise short term capital, declined by 9.19 percent to close at 4.14 percent.
At the primary market auction held Wednesday, the CBN offered NT-Bills worth N225.45 billion across 91-day (N5.85 billion), 182-day (N26.60 billion) and 364-day (N193 billion) tenors.
The FSDH Research show that the NT-Bills market closed on a positive note on Wednesday with average yield declining by 2 percent basis point and settling at 4.44 percent from 4.46 percent on the previous trading day.
Buying interest was witnessed on 30-Jan-20 and 13-Feb-20 maturity NT-Bills, compressing yields by 15 bps and 11bps respectively. The average OMO yields rose by 31bps to 13.11 percent from the last close 12.80 percent. Average OMO yields on the short-term, medium-term, and long-term maturities increased by 48 bps, 37 bps and 10bps respectively.
The CBN intervened through the conduct of direct OMO auctions to moderate liquidity in November as indicated in its economic report for the month of November 2019. The tenor to maturity of the instruments ranged from 82 to 364 days. Total amount offered, subscribed to and allotted, as at November 26, 2019, were N758.61 billion, N694.83 billion and N694.83 billion, respectively. The bid rates ranged from 11.5000 per cent to 13.3399 per cent, while the stop rates were from 11.5000 per cent to 13.3399 per cent. Repayment of matured CBN bills, as at November 28, 2019, was N1,553.26 billion, translating to a net injection of N858.43 billion.
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