One-year T-bill attracts N2.53trn record high bid

Nigeria’s one-year treasury bill (T-bill) auction, on Wednesday, witnessed the largest investor interest this year, attracting N2.53 trillion in bids, nearly five times the amount offered on system liquidity.

Samuel Gbadebo, fixed-income investment analyst at CardinalStone, said that system liquidity on Wednesday was robust, exceeding N800 billion. This may have fuelled some buying interest at the auction, he said.

Gbadebo said, “Speculative trading appeared to be prevalent among participants, with bids reaching as high as 26.82 percent.”

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Just last week, the Yemi Cardoso-led Monetary Policy Committee (MPC) jacked up the interest rate for the sixth time this year by 25 basis points to 27.50 percent to combat rising inflation. This has led to a corresponding increase in treasury bill yields compared to last year.

However, at the auction on Wednesday, the yield on the one-year bill dropped to 29.75 percent from a record high of 30.7 percent.

Analysts at Meristem said in an earlier report that this was likely to happen due to the reduced maturing obligations of N583.26 billion, representing a 4.51 percent decline compared to the preceding auction size of N610.80 billion.

“At the forthcoming auction, we project that stop rates for the offered instruments will remain largely aligned with the levels observed in the previous auction,” it said.

They also said that prevailing system liquidity conditions could exert downward pressure on stop rates.

There was strong system liquidity on Wednesday, closing at a net long position of N803.68 billion.

Despite seeing strong investors’ demand of N2.53 trillion, the CBN sold only N741.15 billion worth of T-bills.

A total of N756.69 billion worth of T-bills was sold, higher than the N583.26 billion maturing bills rolled over by CBN on Wednesday, December 4.

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The 182-day bill was also oversubscribed to the tune of N17.34 billion and got only N13.25 billion allotment.

The shorter treasury bills saw minimal interest by investors. Only N2.30 billion of the N7.86 billion 91-day bill was sold.

Yields on the 182-day and 91-day bills remained the same for the fourth consecutive auction at 20.39 percent and 18.86 percent respectively.