Investors flock to OMO bills as yield hits 28.55%

Investors flocked to the one-year Open Market Operations (OMO) bills auction held Wednesday, as yields surged to an attractive 28.55 percent.

This strong demand for the 357-day OMO bills resulted in it being oversubscribed to the tune of N487.95 billion, over three times more than the N150 billion that was offered.

This is the first OMO bill auction post Monetary Policy Committee decision to hike interest rates by 150 basis points to 26.25 percent narrowing real returns to a negative of 2.3 percent.

The Cardoso-led MPC has jacked up interest rates by a total of 750 basis points to fight Nigeria’s sticky inflation, currently at 33.69 percent.

Olayemi Cardoso, the CBN governor had explained earlier in the year his strategy to curb rising inflation rate, stabilise the exchange rate, and spur confidence in the banking sector and economy, at large.

He had further highlighted in the meeting with investors an outlook for sustained increases in the CBN’s foreign currency reserves, and improved liquidity in the foreign exchange market.

The 105 days and 189- day tenors saw very low buys with subscriptions of N10 billion and N20 billion respectively with yields at 19.80 percent and 21.47 percent respectively.

A total of N518 billion was mopped up at this auction, over twice the amount offered.

Also the CBN at the primary auction rolled over existing T-Bills totalling N221.13billion (N14.42billion, N26.82 billion and N179.89 billion across the 91-day, 182-day and 364.-day instruments, respectivel.

This strong demand for the one year NT-bills resulted in it being oversubscribed to the tune of N677 billion, over three times more than the N179.8 billion that was offered and sold N246 billion worth of it. The stop rate on the long term bill was 20.67 percent.

Similarly the 91-day bill witnessed huge demand as over 36 percent of the N14.42 billion offered was allotted at stop rates of 16.5 percent.

The medium tenor saw low buys of N12.27 billion compared to the N26.81 billion offered at a stop rate of 17.5 percent.

The CBN sold a total of N278.4 billion sold at today’s auction, over twice the subscription it received.