Rates on Nigeria’s one year treasury bill remained slightly the same at 26. 08 percent despite a 150 basis points hike in interest rate by the Monetary Policy Committee.
This is a decrease of 0.02 percent from 26.10 percent on the one-year treasury bill at the previous auction yield.
The MPC on Tuesday increased the Monetary Policy Rate (MPR) to 26.25 percent from 24.75 percent.
Since the appointment of Yemi Cardoso as the CBN Governor, MPR has been raised by 75o basis points so far from 18.75 percent to 26.25 percent at the close of the third meeting of the year.
The one year tenor did not witness the pass through effect of the hike, as the range of bids at Wednesday’s auction were similar to that of the previous auction before the rate hike.
Sources close to BusinessDay revealed that at a meeting with the Debt Management Office and market participants on Monday expectations around this auction was set.
The range of bids rates which is the rates investors offered on the one year NT- bills was 18.50-26.67 percent. Similar to 19.00-26.00 percent saw at the last auction on May 8.
Segun Adams, fixed-income research analyst at Afrinvest West Africa Limited, said that though there was a slight increase in the average stop rate across all tenors it did not reflect the hike in interest rate.
“”On average, the auction cleared at a stop rate of 18.2 percent across all instruments, which is 23 basis points higher than the prior sales but there is a sense that it didn’t adequately reflect the aggressively hawkish outcome of Tuesday’s MPC meeting,” he said.
He said that the DMO, having aggressively front-loaded borrowings since the start of the year, is not in a desperate position to meet targets.
“Moreso, the debt office appears conscious of the elevated borrowing cost to the FG and containing it,” Adams said.
The International Monetary Fund (IMF) in its recent Article IV consultation with Nigeria said that the federal government has raised N7 trillion naira from treasury bills and bond issuances.
“The authorities have now raised naira 7 trillion net in domestic securities year-to-date, on pace to meet staff’s financing assumptions. The authorities have reduced the government’s outstanding overdraft at the CBN by naira 4.8 trillion. This was financed from treasury bills and bonds issuance,” the report stated.
The government frontloaded a substantial part of its 2024 borrowings in the first quarter. Specifically, the second quarter bond auction calendar suggests that the government aims to raise between N300 billion to N600 billion monthly compared to the 2.5 trillion borrowings in the first quarter.
However investors flocked the NT-bills market as the CBN sold a total of N584.7 billion, over 14 percent of its rolled over existing T-Bills of N508.98 billion.
Investors staked a total of N1.43 trillion on the one-year bill versus the N168.66 billion that was offered. Nigeria eventually sold N549.8 billion of it.
The six-month bond offering received N33.2 billion in bids, exceeding the target by over three times. N28.5 billion was allotted at a yield of 19.12 percent, which is higher than the 18.58 percent yield from the last auction.
Demand for the three-month bills fell short of the N331 billion offered by the government. Investors subscribed to a lower amount, and only N60.68 billion was allotted. However, the interest rate offered to investors increased slightly, rising to 17.2 percent from 16.93 percent at the previous auction.
