One-year T-Bills auction witnesses largest investor interest with N2.53trn in bid

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

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

He added that “ Speculative trading appeared to be prevalent among participants, with bids reaching as high as 26.82 percent,”.

Just last week, the Cardoso led Monetary Policy Committee 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 an equal increase in the yields of treasury bills 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 anchored on the reduced maturing obligations of N583.26 billion, representing a 4.51 percent decline compared to the preceding auction size of N610.80 billion.

Read also: T-bills yields hit record high of 30.7% as investors price in rate cut

“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 mentioned prevailing system liquidity conditions, which could exert downward pressure on stop rates.

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

Despite seeing strong investors demand of N2.53 trillion, the CBN only sold only N741.15 billion worth of it.

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.

The 182-days 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.