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Investors’ 18% bid for Tbills show quest for higher rate


Over ambitious investors are raising their bidding for Nigerian Treasury Bills (NTB), higher than the rates the Central Bank could offer, all in anticipation for a higher rate after general elections.

The CBN on Wednesday auctioned a total of N254.64 billion NTB at the primary market and investors bided more at higher rates than the offered rates, even though the issue was later oversubscribed.

Specifically, investors were bidding as high as 18 percent for long term instruments while the CBN offered 15 percent.

The summary of the auction result obtained by BusinessDay shows that N7.85 billion was offered for 91 days tenor with allotment/issue date of January 31, 2019. The offer was oversubscribed by N41.04 billion as a range bid of between 10.8500 – 12.0000 percent. However, N28.01 was allotted at a stop rate of 11 percent.

For the 182 days tenor, the CBN offered N 69.56 billion at a stop rate of 13.5 percent. It was oversubscribed by N 68.42 billion at a range bid of between 12.8500 – 14.5000 percent and the allotment was N58.68 billion.

Also, for 364 day tenor with allotment/issue date of January 31, 2019, the CBN offered N177.22 billion, which was also oversubscribed by N214.38 billion at a range bid of between 14.3000 – 18.0000 percent. However, the allotment was N167.93 billion,  at a stop rate of 15 percent, which was below the offered amount.

Ayodeji Ebo, managing director, Afrinvest Securities limited said the reason for the under allotment may be attributed to investors demand for higher rates.

Based on the data, he explained that the 364-day tenor was over-subscribed (bid-cover ratio of 1.2x) however, the CBN was not willing to go above the 15.0 percent stop rate. From the range of bid rates, we observed investors bid as high as 18 percent.

“Investors are still optimistic that the interest rate may still move up before the general elections especially the OMO stop rate”, Ebo said in an emailed response to BusinessDay.

The CBN had earlier disclosed that it will in the first quarter of 2019 issue N823.43 billion worth of Treasury Bills, while N985.93 billion will mature in the same period.

A breakdown of the Nigerian Treasury Bills issue programme for the Q1 2019 released on Tuesday by the CBN show that a total of N59.02 billion Treasury Bills for 91 days tenor, N248.84 billion for 182 days, and N678.05 billion for 364 days tenor, will hit the financial market in the first quarter.

The CBN will rollover a total of N51.45 billion for 91 days tenor, N164.91 billion for 182 days and N607.05 billion for 364 days tenor, in the same period.

The general elections are scheduled for February 16, 2019 and may likely usher in stability and smooth transition or disruption, either of which will impact the economy and businesses.

Meanwhile, rates at the inter-bank market are expected to maintain upward trajectory despite the Central Bank of Nigeria (CBN)’s N315.6bn Open Market Operations (OMO) maturities this week.

Overnight inter-bank rate increased by 0.50 percentage to 11.86 percent on Friday, while the open Buy-Back also rose by 0.79 percentage point to 11.07 percent.

“We expect money market rates to slightly advance as we expect the CBN to sustain the pace of OMOs in a bid to keep system liquidity tight. Hence, we don’t expect the OMO maturities of N315.6bn in the coming week to improve system liquidity”, analyst at Afrinvest Securities Limited said.

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