Investors Sustain Hunger for Long-Term OMO Bill as Rate Drops

By Dipo Olowookere

The strong appetite for long-term investment tool by investors continued on Thursday when the Central Bank of Nigeria (CBN) auctioned its Open Market Operations (OMO) bills.

The central bank took its OMO bills valued at N200 billion to the market for auctioning across three maturities, but went back selling only for a tenor, the one-year.

An analysis of the exercise by Business Post revealed that N10 billion worth of 82-day bill to the market, another N10 billion worth of the 180-day bill and N180 billion worth of 362-day bill.

However, market participants showed no interest in the short-term instrument, with minimal demand for the mid-term liquidity management tool and strong hunger for the long-dated bill.

While the 82-day bill received no bid during the auction, the 180-day instrument got N1.5 billion subscriptions, with the 362-day tenor getting N407.60 billion bids from subscribers.

Due to high demand for the one-year bill, the apex bank cut the stop rate to 13.20 percent from 13.25 percent at the last auction, with only N201.25 billion allotted to investors, who were mainly foreign portfolio investors. The CBN declared No Sale for the 82-day and 180-day bills at the close of the exercise.

On Wednesday, the central bank offered treasury bills for sale to investors through the primary market and the stop rates were significantly lowered during the exercise to as low as 2.95 percent amid high demand from investors.

Meanwhile, money market rates significantly declined on Thursday on the back of inflows from maturing OMO bills, which bolstered system liquidity to open with about N450 billion positive.

Consequently, the Open Buy Back (OBB) rate dropped to 4.14 percent from 13.33 percent, while the Overnight (OVN) rate reduced to 5.07 percent from 14.17 percent.

According to analysts at Zedcrest Research, “We expect rates to slightly increased (on Friday) as banks make funding provision for FX retail debits.”