The Central Bank of Nigeria’s (CBN) second Treasury Bills Auction of the year worth N154.38 was oversubscribed by 46% yesterday, with marginal fall in rates on the 91 and 180-day tenors.
The apex bank recorded N287.8 billion in total subscription during the auction. T-bills worth N154.38 billion were provided across the 91-day, 182-day and 364-day tenors at the primary auction.
The apex bank had offered N4.38 billion for the 91-day tenor and recorded a total subscription of N29.83 billion, making it an oversubscription of N25.45 billion. The 182-day tenor did great also like the N10 billion offered was over-subscribed by N42.49 billion, receiving a total subscription of N52.49 billion.
Meanwhile, the highest subscription among the treasury bills was the 364-day tenor which experienced a total subscription of N205.48 billion from an offering of N150 billion. That means it was oversubscribed by N55.48 billion.
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The treasury bills were auctioned in a Dutch auction, which is a public offering auction structure, where the price of the offering is set after taking in all bids to determine the highest price at which the total offering can be sold. Investors place a bid for the amount they are willing to buy in terms of quantity and price.
The following were reportedly the range of bid rates, with 90-day tenor doing 2.2500 and 5.9116 for the 91-day tenor; 2.8000 and 9.5000 for the 182-day tenor; 5.4000 and 13.1800 for the 364-day tenor. The Central Bank’s stop rates stood at 3, 4 and 6.54 for the 91-day, 182-day, and 364-day tenorss respectively.
The CBN reserved the right to reject bids and the allotment letters and payment for successful bids were reportedly issued last Thursday. The apex banks had processed all money market dealers’ bids through the CBN’s s4 web interface as at 11 am on Wednesday.
However, though economic fundamentals might not necessarily support a low-interest rate regime, the CBN is sticking to its guns and keeping rates low. Though rates dropped marginally on the 90-day and 180-day tenors, there was also a marginal increase on the 364-day tenor, which could mean the CBN is ready to keep the rate low and steady as it continues to watch reactions in the money market space.
Over subscription in the face of falling rates shows desperation by the investors, most of whom are still very skeptical and pessimistic about the state of the economy. Hence their continued preference for such zero risk instruments.