CBN Cuts One-Year OMO Bill Rate by 0.15% After 289.88% Subscription

By Dipo Olowookere

The demand for long-dated debt instrument by investors at the secondary market for treasury bills continued on Thursday when the Central Bank of Nigeria (CBN) floated an OMO auction.

Business Post reports that during the exercise, the apex bank offered for sale OMO bills worth N300 billion in three maturities. However, subscriptions worth N886.66 billion were received from market players.

It was observed that larger percentage of these offers were from the long-date instrument, which was subscribed to by 289.88 percent.

The CBN had auctioned N200 billion worth of 364-day bill, but received offers valued at N779.75 billion, indicating an oversubscription of N579.75 billion. However, the bankers’ bank eventually allotted N157.23 billion, with the stop rate lowered to 12.25 percent from 12.40 percent, representing 0.15 percent reduction.

At the auction yesterday, the central bank offered N50 billion of 266-day bill, but subscriptions valued at N73.80 billion were received and allotted at 11.84 percent, same rate with the last exercise.

Also, N50 billion worth of 112-day bill was auctioned, with N33.11 billion subscriptions received and allotted at 11.40 percent, same rate the instrument was sold at the previous OMO auction.

Meanwhile, the N264 billion OMO sale by the central bank on Thursday resulted in the raising of the money market rates by 0.86 percent, closing at 4.50 percent.

This followed that 0.86 percent increased each by the Open Buy Back (OBB) rate and Overnight (OVN) rate yesterday.

At the close of transactions, while the OBB rate closed at 4.14 percent from 3.29 percent, the OVN rate finished at 4.86 percent from 4.00 percent.

“We expect rates to trend slightly higher tomorrow, due to funding for the CBN’s bi-weekly retail FX auction,” analysts at Zedcrest Research said.