Nigerian Treasury Bills (NTBs) latest auction held on the 4th of September 2024 saw a remarkable display of investor interest in over N1 trillion in subscriptions.
The auction results revealed strong demand across all tenors, particularly for the 364-day bills, as yield-seeking investors rushed to lock in favourable returns amidst evolving macroeconomic conditions.
A total of N233.31 billion was offered by the Central Bank of Nigeria (CBN), which is 43.08% lower than the N409.98 billion offered at the previous auction on August 21, 2024.
The total subscription, however, far exceeded the offer, reflecting the strong investor appetite for the relatively attractive returns provided by government-backed securities.
Across all three tenors, total subscriptions reached a staggering N1.13 trillion, representing an oversubscription rate of 384.17%. The total subscription is 9.96% higher compared to the N1.03 trillion subscribed in the previous auction.
Despite the high level of subscriptions, the CBN allotted only the offered N233.31 billion across all tenors, maintaining its target issuance.
The total amount allotted is a 19.81% decrease from the N291.03 billion allotted in August. This reduction in allotment, despite the higher subscriptions, suggests that the CBN was more selective in accepting bids, possibly to control the overall yield curve and avoid oversaturating the market with liquidity.
Breakdown of the Auction
- The CBN had initially offered a total of N233.7 billion in Treasury Bills across three tenors: 91-day, 182-day, and 364-day, but received an overwhelming subscription of N1.07 trillion from investors, reflecting a keen appetite for risk-free assets.
- The 91-day bills were oversubscribed by more than double, with the offer size set at N19.6 billion and total subscriptions reaching N41.7 billion. However, only N7.86 billion was eventually allotted.
- For the 182-day bills, the CBN offered N10.55 billion, drawing subscriptions of N17.97 billion, out of which N1.99 billion was allotted.
- The 364-day bills, with an offer size of N203.15 billion, saw the heaviest subscriptions of N1.07 trillion, with a final allotment of N223.47 billion, the highest in the auction.
Bid Rates and Stop Rates Movement
Investors offered bid rates in a wide range, signalling mixed sentiments in the market. For the 91-day tenor, bid rates ranged from 16.30% to 20.00%, while the 182-day bills received bid rates between 17.50% and 20.50%.
The longer 364-day bills, however, saw the broadest range of bids, spanning from 27.00% to 30.00%, highlighting investors’ expectations for higher returns over the longer term as inflationary pressures remain persistent.
The stop rates declined across all three tenors in comparison to the previous auction. The 91-day bills closed with a Stop rate of 17.00%, down from 18.20%, marking a 1.20% drop. The 182-day bills ended at 17.50%, down from 19.20%, a decline of 1.70%. The 364-day bills closed at 18.94%, down from 20.90%, marking the steepest decline of 1.96%.
Despite the drop in stop rates, the true yields for investors remained attractive, particularly for the 364-day bills, which provided a return of 23.3654%. The 91-day and 182-day bills also offered competitive returns, at 17.7675% and 19.1881% respectively.
What you should know
- With inflationary concerns and tightening monetary policies dominating the economic landscape, the strong demand in Nigeria’s Treasury Bills market signals continued investor preference for government-backed securities as a safe haven.
- Nairametrics earlier reported that the Central Bank of Nigeria (CBN) is set to re-issue N2.2 trillion worth of maturing Nigerian Treasury Bills (NTBs) in the fourth quarter of 2024.
- This is according to the newly released 2024 Issue Calendar seen by Nairametrics. The re-issuance program is part of the government’s ongoing efforts to manage liquidity, sustain the financial market, and maintain economic stability.
