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.
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.
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.
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.
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.