CBN Crashes Treasury Bills Rate Further to 1.30%

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Image Credit: Corporate Finance Institute

By Dipo Olowookere

It was another bad outing for treasury bills investors in Nigeria on Wednesday as the stop rates were further slashed at the primary market.

Yesterday, the Central Bank of Nigeria (CBN) conducted a PMA with the debt instruments worth N107.1 billion auctioned at the exercise.

According to the analysis by Business Post, the market was very busy with investors filing in their orders as they jostled to be part of the PMA.

From the bids received by the apex bank, market participants showed huge interests in the short-term and medium-term maturities.

During the exercise, the CBN offered for sale N5.9 billion worth of the 91-day bill, N26.6 billion worth of the 182-day bill and N74.6 billion worth of the 364-day bill.

But the subscribers bided N27.7 billion for the three-month instrument, N63.1 billion for the six-month instrument and N98.4 billion for the one-year instrument, amounting to a total of N189.2 billion and indicating a subscription level of 176.7 per cent.

However, the central bank allotted N8.9 billion for the 91-day tenor, N26.6 billion for the 182-day maturity and N71.6 billion for the 364-day bill.

For the stop rates, the bank cleared the short-term bill at 1.30 per cent as against the previous 1.79 per cent.

Also, the medium-term rate was cut down to 1.80 per cent from 1.91 per cent, while the long-term rate was sliced to 3.35 per cent from 3.39 per cent.

The treasury bills stop rates have continued to go down despite the rise in the inflation rate in the country.

The National Bureau of Statistics (NBS) was expected to release the numbers for June yesterday, but it did not.

The inflation rate for May 2020 rose to 12.40 per cent from 12.34 per cent reported in April. The figures for last month are expected to rise, according to analysts as a result of the COVID-19 crisis in the country and across the globe, which caused a shutdown of the economy.

Treasury bills are among the financial tools used by the government to borrow money from the domestic debt market to finance some projects in the budget.

In a recent report released by the Debt Management Office (DMO), it was revealed that in the first three months of 2020, the federal government paid interests valued at N111.6 billion to those who invested in treasury bills.

The hunger for investment in T-bills despite its low rates when compared with tools like stocks and others is because of its risk-free nature.

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