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Debt Securities

CBN offering N223billion Treasury Bills in market auction

@cenbank will be offering N223.2 billion T-bills in the first August 2019 #PMA.

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Treasury Bills, CBN

The Central Bank of Nigeria (CBN) is expected to hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on August 1.

The apex bank will be offering ₦28 billion, ₦58.68 billion, and ₦136.52 billion for 91-days, 182-days, and 364-day maturity periods respectively.

Treasury Bills, CBN

Central Bank of Nigeria Headquarter, Abuja.

Before learning how to participate in this sale, see below a breakdown of previous sale.

Last sale: During the last sale, the CBN sold ₦29 billion in 91-day treasury bills at an interest rate of 9.74% and will mature on  September 17, 2019. ₦69.6 billion in 182-day treasury bills at an interest rate of 10.75%. The bills will mature on January 16, 2020. It also sold ₦374.76 billion 364-day treasury bills, maturing on July 16, 2020 at a rate of 11.139%.

[READ ALSO: CBN to offer loans to investors, as milk production initiative takes-off]

What is the Minimum Amount I can Buy? Previously, you could buy for as low as ₦10,000 and in multiples of ₦1,000 thereafter. However, this was increased to ₦50 million in 2017. You can still participate in this bid by approaching your bank and participating in the pooling fund option.

Here, the bank pools funds from others like you, who do not have the minimum of ₦50 million required to participate in a direct bid.

Some banks also have their own minimum limits for pooling funds which can be as high as ₦1 million. You will need to know if your bank’s minimum requirement is financially compatible with yours so that you can bid with them, or shop for another bank with a compatible benchmark.

How Can I Buy Treasury Bills? Assuming you own more than ₦50 million and wish to participate directly in the bid, you will have to approach your bank and request a form. Fill the form with your personal information, indicating the amount you want to buy, the tenor, and your bid rate.

The bid rate, otherwise called your stop rate, is the likely interest rate that you have indicated to receive for the principal that you will be investing in the T-Bills.

How is the Bid Rate Selected? The CBN selects the bids that fall below the accepted marginal rates. The marginal rate is the minimum average rate for bids submitted within a bid window.

For example, if the marginal bid rate for a bid opening on August 1st is 11%, then bids falling below this rate will be accepted and those above will be rejected.

Also, you can purchase T-Bills from the secondary market Over-The-Counter (OTC) through a broker.

Are Treasury Bills Safe? Buying treasury bills is one of the safest forms of investment; they are backed by the full faith and credit of the Federal Government of Nigeria. They are also tax-free.

Jaiz bank

[READ ALSO: CBN says commercial banks can invest in Treasury Bills for now]

What if my funds don’t get pooled? You still have another option. You can get the bank to sell to you rediscounted treasury bills. This is basically buying from someone else who is in need of funds and not willing to wait until maturity.

Banks typically prefer this option for retail investors who have less than N1 million in cash to invest.

The difference between this and buying from the primary market is that you may not get the same interest rate when compared to those who bought from the primary market. However, the difference is not that huge.

Here is the link to calculate the yield on your Treasury Bills.

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Debt Securities

DMO announces May 2021 FGN savings bond offer for subscription

The DMO has announced the offer for subscription of the May 2021 Federal Government Savings Bond to investors.

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The Debt Management Office (DMO), on behalf of the Federal Government has announced the offer for subscription of the May 2021 Federal Government Savings Bond to investors.

This disclosure is contained in a circular issued by the DMO on May 3, 2021, and can be seen on its website noting that there are 2-year and 3-year savings bonds.

A breakdown of the bonds shows that the 2-year FGN savings bond will be due on May 12, 2023, at 7.753% per annum and the 3-year FGN Savings Bond which will be due on May 12, 2024, at 8.753% per annum.

The offer has an opening date of May 3, with a closing date of May 7, while the settlement date is May 12, with the coupon payment dates as follows: August 12, November 12, February 12 and May 12.

The circular also states that the unit of sale is N1,000 per unit subject to a minimum subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50,000,000

It also states that the interest is payable quarterly with the redemption expected to be in bullet payment on the maturity date.

In case you missed it

It can be recalled that last month, the DMO on behalf of the Federal Government, offered for subscription April 2021, Federal Government Savings Bond to investors.

The offer consisted of a 2-Year FGN Savings Bond due April 14, 2023, at 5.522% per annum and a 3-year FGN Savings Bond due April 14, 2024, at 6.522% per annum.

The opening date was April 6, 2021, with the closing date on April 9, 2021, settlement date on April 14, 2021, and the coupon payment dates on July 14, October 14, January 14, and April 14.

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Debt Securities

CBN’s N88 billion treasury bill auction yesterday was oversubscribed by 174.62%

At the end of the auction, one-year treasury bills sold for 9.75% per annum.

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Some experts are uncertain of what to expect from money markets in H2 2020

The Central Bank of Nigeria’s (CBN) Treasury Bills Auction worth N88.46 billion was oversubscribed by 174.6% yesterday. The stop rates for the 91 and 182-day tenor bills fixed at 2.00% and 3.50% respectively.

The stop rate of the 364-day tenor bill was pegged at 9.75% according to the result of the NTB auction.

The apex bank recorded N242.94 billion in total subscription, as the treasury bill auction was oversubscribed by 174.62%, however, T-bills worth N88.46 billion were provided across the 91-day, 182-day and 364-day tenors at the primary auction.

At the end of the auction, bills worth about N129.46 billion were allotted to investors.

READ: CBN’s N154.38 billion T-bills auction over subscribed by 46% as rates fall marginally  

Demand for Treasury Bills Surge

Demand for Treasury Bills has surged in recent months as yield-hungry investors scamper away from equities into risk-free government securities. While 2020 was marred with ultra-low interest rates on fixed income securities like Treasury Bills, yields have spiked in recent weeks to the surprise of investors.

With inflation rate galloping past 18% the pressure to flee the naira appears to have forced the central bank to revise its monetary policy strategy, allowing rates to rise.

READ: CBN, First Bank on collision course over removal of MD/CEO

Summary of the NTB Auction today

The 91-day bill was undersubscribed by 7.51% as it received a subscription of N10.53 billion, against an initial offer of N11.39 billion.

The 182-day tenor bill on the other hand performed well, as it was oversubscribed by 50.87% with an impressive subscription of N9.05 billion which was received yesterday, against an offer of N223.35 billion.

The 364-day tenor bill recorded the highest subscription with an oversubscription rate of 214.25%, as investors’ total subscription was valued at N223.35 billion, relative to an initial offer of N71.07 billion.

READ: U.S Government makes a premium selling Bitcoin

The breakdown of the allotment

At the close of the auction yesterday, about N7.19 billion of the 91-day tenor bill was allotted, lower than the initial offer of N11.39 billion, while N6 billion worth of the 182-day bill was allotted to investors.

With the settlement for the bill pegged for the 29th of April 2021, about N116.27 billion of the 364-day tenor bill was also allotted to investors.

The oversubscribed bills confirm the huge demand for risk-free government securities amidst a dearth of sizeable investment funds.

Jaiz bank

READ: Bank of England considers digital currency

What you should know

  • The treasury bills were auctioned in a Dutch auction structure, as the price of the offerings were set after bids were received to determine the highest price at which the total offering could be sold.
  • This provided investors with the opportunity to place bids for the amount they were willing to buy in terms of quantity and price.
  • The range of bids was placed at 1.99 and 10.00 for the 91-day tenor; 3.49 and 10.00 for the 182-day tenor, 8.8943 and 15.00 for the 364-day tenor.

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