Treasury Bills Rates May Hit 3% at Next PMA

By Dipo Olowookere

There are strong indications that the stop rates of treasury bills in Nigeria will further drop to around 3 percent at the next primary market auction (PMA).

Business Post reports that on Thursday, January 2, 2020, the Central Bank of Nigeria (CBN) will offer for sale fresh T-bills to local investors at the primary market and going by the previous sessions, the rates will marginally reduce.

On Wednesday, December 18, 2019, the apex bank offered N7 billion worth of the debt instruments to market participants and from the results, the rates went down as low as 4 percent.

One surprising thing observed during the exercise was the huge appetite subscribers still had for the investment tool. The central bank received subscriptions worth N100 billion for the N7 billion it offered for sale, with N24.7 billion staked on the three-month instrument, N18.7 billion on the six-month instrument and N56.6 billion on the 12-month instrument.

The apex bank eventually allotted N2 billion for the 91-day bill at 4 percent (5 percent previously), N2 billion for the 182-day bill at 5 percent (6.19 percent previously) and N3 billion for the 364-day bill at 5.50 percent (6.88 percent previously).

Just after the exercise, the CBN conducted an OMO auction for offshore investors and offered the investment instrument to them at 13.28 percent.

OMO bills worth N150 billion were offered for sale, with N250.5 billion allotted to subscribers. The bills were auctioned in three maturities; N20 billion worth of the 88-day bill, N30 billion worth of the 179-day bill and N100 billion worth of the 361-day bill. However, as it had been in the previous exercises, investors were more interested in the long-dated tenor, staking N250.5 billion on the instrument, snubbing the other two tenors.

As local investors prepare for Thursday’s PMA, further rise in demand is expected to crash the rates and as some observers have noted, there might be a time when the central bank will sell the treasury bills at negative interest rate to investors.