CBN Increases Treasury Bills Stop Rates at PMA

By Dipo Olowookere

Stop rates of treasury bills were increased by the Central Bank of Nigeria (CBN) at the primary market auction (PMA) held on Wednesday, May 13, 2020.

It was the first time in many weeks the central bank was raising the treasury bills rates at the primary market.

Business Post reports that the raising of the rates was only done on two of the three maturities offered for sale at the exercise today.

It was observed that the increase in the stop rates was done despite the heavy demand for the debt instrument, which should have forced a further slash in the rates.

The apex bank went to the market with T-bills worth N33.84 billion, but received subscriptions valued at N185.57 billion.

As earlier stated, the bills were auctioned in the usual three tenors; 91-day, 182-day and 364-day bills.

Business Post reports that N4.38 billion worth of the three-month maturity, N12.92 billion worth of the six-month tenor and N16.54 billion worth of the 364-day instruments were offered for sale today.

However, when the bids were analysed, investors staked N22.34 billion on the 91-day bill, N41.20 billion on the 182-day tenor and N102.03 billion on the 364-day maturity.

For the allotment, the CBN sold N19.78 billion for the short-term bill, N40.09 billion for the mid-term instrument and N82.89 billion for the long-term maturity, totalling N142.76 billion.

It was observed that while the stop rate for the 364-day bill was retained at 3.84 percent by the CBN, it was increased to 2.85 percent from 2.50 percent for the 182-day rate and raised to 2.50 percent from 1.85 percent for the 91-day stop rate.

The hike in the treasury bills stop rates was earlier predicted by analysts at Business Post when the federal government announced converting the $2.36 billion (N850 billion) external borrowing to domestic loan.

It was then projected by our analysts that in order to lure local investors to raise the N850 billion needed to fund the 2020 budget deficit, coupon rates of the debt instruments; bonds, treasury bills and others, would have to be slightly pushed upward.