CBN Eases Rates for Short, Mid-Dated T-Bills at PMA

By Dipo Olowookere

Stop rates for short and mid-term treasury bills were lowered by the Central Bank of Nigeria (CBN) on Wednesday at the primary market auction, while rate for the long-dated instrument was slightly raised during the exercise.

At the previous exercise held a fortnight ago, the apex bank surprisingly increased rates for the three maturities after successive cuts as a result of strong appetite for the investment tool at the market.

This huge demand for T-bills continued today, going by results of the auction obtained by Business Post. Of the N154.4 billion worth of the debt instruments offered for sale to both local retail and institutional investors at the market on Wednesday, the central bank received bids valued at N287.8 billion, showing a subscription level of 186.4 percent.

Business Post reports that the CBN auctioned N4.4 billion worth of the 91-day bill, N10.0 billion worth of the 182-day bill and N140.0 billion worth of the 364-day bill to traders at the market today.

However, when the subscriptions were analysed, subscribers staked N29.8 billion on the short-term tenor, N52.5 billion on the mid-term treasury bill and N205.5 billion on the long-term maturity, indicating subscription level of 677.3 percent, 525.0 percent and 146.8 percent respectively.

The apex bank allotted the amount it offered for sale for the respective debt instrument, while for the stop rates, the central bank reduced the 91-day bill rate to 3.00 percent from 3.50 percent, the 182-day bill rate was trimmed to 4.00 percent from 4.50 percent, while the 364-day bill rate was marginally increased to 6.54 percent from 6.50 percent.

Meanwhile, rates in the money market remained in double digits on Wednesday, with the Open Buy Back (OBB) rate and the Overnight (OVN) rate moving in different directions.

While the OBB rate increased by 0.27 percent to 15.42 percent from 15.14 percent, the OVN rate decreased by 0.08 percent to 15.92 percent from 16.00 percent.

At the market tomorrow, the rates are expected to significantly decline on the back of inflows into the financial system from the N600 billion bond and N400 billion OMO maturities. The central bank is anticipated to float an OMO auction during the session, but what it would be offering for sale may not be enough to soak the excess liquidity.