CBN Ups Treasury Bills Offer to N550bn Amid Softer Demand, Shifting Investor Focus

The Central Bank of Nigeria (CBN) has increased its Treasury Bills (T-Bills) Primary Market Auction offer from N400 billion to N550 billion across the 91-day, 182-day, and 364-day tenors. Despite the larger offer, investor appetite weakened, with total subscriptions dropping by nearly 30% to N1.01 trillion. However, the auction still resulted in a total allotment of N598.33 billion, an 8.79% increase from the previous week’s auction, reflecting CBN’s ongoing effort to manage market liquidity and investor expectations.

Analysts from Meristem noted that stop rates for the short-term 91-day and 182-day tenors held firm at 18.00% and 18.50% respectively, while the longer 364-day tenor experienced a slight rate increase to 19.63%. Investor interest remained heavily skewed towards the 364-day paper, which drew in almost 88% of the total bids, worth N956.88 billion, indicating a preference for longer duration despite the shifting yield curve.

In the secondary T-Bills market, yields experienced a modest decline as unsuccessful primary market participants moved to secure positions. The average yield dropped by 10 basis points to 20.97%. Yields on short-term maturities saw only slight movements, while mid- to long-term maturities fluctuated more, highlighted by a significant 48 basis point drop in 9-month bills, suggesting investors are reacting cautiously to yield trends and market signals.

The CBN also carried out an Open Market Operations (OMO) auction during the week, offering N500 billion in the 315-day and 329-day tenors. This auction was well received, with total bids amounting to N773.74 billion and sales closing at N756.74 billion. Stop rates for these instruments were higher than standard T-Bills, at 22.65% and 22.72% respectively, further illustrating investor demand for attractive yields over longer durations.

Meanwhile, the local bond and Eurobond markets reflected more optimistic sentiment. Yields on key FGN bond maturities declined slightly, closing at an average of 19.04%. In the Eurobond space, buying pressure drove yields down across most maturities, lowering the average yield to 10.12%. The exception was the NOV-27 paper, which saw a minor uptick. According to Meristem, these developments point to strategic shifts by investors seeking to navigate a fluid macroeconomic and interest rate environment.

Source: Punch