Nigerian T-bills auction rates crash after CBN’S OMO directive

Stop rates on Nigerian Treasury Bills (T-bills) fell across tenors at the primary market auction conducted by the Central Bank of Nigeria (CBN), Wednesday, as investors oversubscribed the bills following the apex bank’s restriction of individuals and Nigeria’s corporates from participating in both primary and secondary markets of its Open Market Operation (OMO) window.

Rate on the 91-day bill cleared at 9.49 percent, the lowest since June 15, 2016, while rates on 182-day and 364-day bills cleared at 10.45 percent and 11.50 percent, respectively. These rates compare with 10.80 percent, 11.00 percent and 12.94 percent on the 91-day, 182-day and 364day bills at the previous T-bills primary market auction.

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“The most suitable alternative for OMO bills will be investment in government T-bills as they are similar in tenor and have been largely interchangeable in recent years,” analysts at Cardinalstone had said. “We expect to see increased demand in the bills market and at subsequent NTB auctions through the year.”

The CBN’S T- Bills auction worth N132.55 billion conducted Wednesday to roll over an equal amount of bills maturing Thursday recorded oversubscription across the three tenors with a bid-offer ratio of 4.27x with the 364-day recording the strongest demand as investors’ bids were 4.72x more than the offered amount.

Investors bid N565.62 billion on the instruments, but CBN could only allot bills worth N132.55 billion at N28.02 billion, N10.62 billion, and N93.92 billion on the 91-day, 182-day, and 364-day bills, respectively.

The decline in T-bills auction rates is in line with analysts’ expectation following the CBN’S intention to block OMO market participants excluding foreign investors and local banks in a bid to reduce the cost of borrowing and spur investment to the real sector of the Nigerian economy.

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