Treasury Bills Just Became Unattractive As CBN Sells At Lowest Rate In Years

Intending investors in Nigerian Treasury Bills (T-Bills) may have to rethink their strategy as Treasury Bills rate are now falling like a pack of cards. According to data released by the Central Bank a total of N122.95 billion worth of Treasury bills was sold on Wednesday in CBN’s first auction for the month of November 2015.

The T-Bills had maturities of 3 to 1 year and were sold at ridiculously low yields. Investors looking to invest in treasury bills for just 91 days got a yield of just 5.82% pa. Investors with a 182 days and 364 days tenor in mind got 7.98% (previous 10.15%) and 9.48%pa (previous 10.81%).

The drop in yields follows a similar drop in treasury bills yield on the secondary market. Three months treasury bills yields had dropped to as low as 4.9% on Wednesday. Analysts believe the trigger for this drop is the reduction in the cash reserve requirements of banks following the TSA directive. This has now placed a lot of cash in the hands of banks. With credit risk sky-high, banks have no choice but to pour some of that cash into government securities.