Stop Rates to Rise as CBN Sells Fresh T-Bills Wednesday

By Dipo Olowookere

The recent increase in the stop rates of treasury bills in Nigeria is expected to continue this week as the Central Bank of Nigeria (CBN) auction the debt instrument worth N208.60 billion to investors.

The apex bank will on Wednesday offer for sale the T-bills at the primary auction market (PMA), with the usual three maturities available.

The central bank is expected to re-issue maturing N24.37 billion worth of 91-day bill, N38.75 billion worth of 182-day bill and N145.48 billion worth of the 364-day bill during the exercise.

Last week, Business Post reported that the average yields of treasury bills at the secondary market was nearly hitting 15 percent. This was already attracting foreign portfolio investors, who were exiting the market, when the yields were falling below 11 percent few weeks ago.

In the past auctions, the central bank has been raising the stop rates to bring back investors and this week, a further increase is anticipated.

“We expect their stop rates to increase, given the under-subscription witnessed during bond auctions last week which was mainly due to the weak patronage by FPIs amid foreign exchange rate risk.

“We expect NIBOR to contract as N563.15 billion worth of T-bills and N769.52 billion FAAC recent inflows create ease in financial system liquidity,” analysts at Cowry Asset said.

Last despite T-bills maturities worth N92.31 billion, through Open Market Operations (OMO), the financial system was still drained of liquidity as NIBOR rose for all tenure buckets. Specifically, NIBOR for overnight funds, 1 month, 3 months and 6 months tenure buckets increased to 19.17 percent from 17.69 percent, 15.37 percent from 14.75 percent, 14.88 percent from 13.81 percent and 16.22 percent from 15.41 percent respectively.

Elsewhere, NITTY rose across maturities tracked as sell-offs by foreign portfolio investors became intense – yields on 1 month, 3 months, 6 months and 12 months maturities rose sharply to 14.65 percent from 13.76 percent, 14.02 percent from 12.08 percent, 15.10 percent from 14.27 percent and 14.53 percent from 13.78 percent respectively.