By Dipo Olowookere
The Central Bank of Nigeria (CBN) on Wednesday, July 1, 2020, conducted the first primary market auction of treasury bills for the second half of 2020.
At the PMA, the apex bank offered for sale T-bills worth N88.9 billion across the usual three maturities of 91-day, 182-day and 364-day bills.
However, results of the exercise showed that investors bombarded the CBN with subscriptions valued at N330.7 billion, indicating 372.0 percent oversubscription.
According to the breakdown of the PMA, N10.0 billion worth of the 91-day instrument was offered for sale, while N20.0 billion of the 182-day tenor was up for grab, with N58.9 billion worth of the 364-day maturity taken to the market for auction.
But when the bids were analysed by Business Post, it was discovered that all the bills were oversubscribed, with the long-dated bill getting the most attention of investors.
In the past exercise, the hunger for the one-year maturity has always been very high as market participants prefer to deploy their funds in the bill to the others.
According to the results, the 12-month instrument received N246.9 billion bids from subscribers, while the six-month instrument got N58.8 billion, with the three-month instrument receiving N25.0 billion subscriptions.
But when the central bank, which conducted the exercise for the Debt Management Office (DMO), allocated the bills, it shared N10.0 billion to the 91-day subscribers, N20.0 billion for 182-day bill and N58.9 billion for 364-day bill.
For the stop rates, the CBN slightly reduced them for each of the three maturities, with the 91-day bill trimmed to 1.79 percent from 1.80 percent, the 182-day bill cut to 1.91 percent from 2.04 and the 364-day bill dropped to 3.39 percent from 3.75 percent.
Meanwhile, at the money market, rates depreciated yesterday by 3.15 percent to close at 12.35 percent from 15.50 percent as a result of the 3.20 decline suffered by the Open Buy Back (OBB) rate and the 3.10 percent slump in the Overnight (OVN) rate.
It was observed that the rates were pressured despite the less robust liquidity on Wednesday because of lower funding needs and the option available for banks to remain in the SLF window to sort their funding gaps.
At the close of business, the OBB rate fell to 11.80 percent from 15.00 percent, while the OVN dropped to 12.90 percent from 16.00 percent.
Today, the rates may likely further depreciate on the back of inflows from the expected OMO maturities of about N88.9 billion into the market.
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