The Central Bank of Nigeria (CBN) slashed spot rates on Treasury bills sold to investors in the primary market auction (PMA) on Wednesday. At the auction, the apex bank made a total of N161.9 billion in Treasury notes available for subscription across normal maturities.
The Treasury bill auction, which was divided into 91-day, 182-day, and 364-day bills, was substantially oversubscribed as market actors poured money into naira assets.
CardinalStone Securities Limited said in an email that the Treasury bills auction results revealed a bid-to-offer and bid-to-cover ratio of 3.47x each. The CBN allocated the exact amount offered.
Stop rates declined across all tenors, settling at 17.35% (-35 bps) for the 91-day, 18.57% (-50 bps) for the 182-day, and 22.82% (-35 bps) for the 364-day instruments.
The spot rate on 91-day Treasury bills slumped by 35 basis points to 17.35%. Also, the spot rate offered on 182-day Treasury bills plunged by 50 basis points to 18.57%. The one year Treasury bill was sold at 22.82%, down by 35 basis points.
Interbank rates remained elevated, rising by 13 bps and 11 bps, respectively, to settle at 31.23% and 31.64% in the money market. This reflected the ongoing tightened system liquidity, without adequate funding to support the financial system.
Due to the expected outflow for the auction, money market rates have also been projected to rise further this week in the absence of fresh inflows from maturing instruments. The spot rate reflects real-time market supply and demand for an asset available for immediate delivery.
The Nigerian government, through it’s CBN, issues Treasury bills at a discounted rate and pays the interest upfront while the investment sum is repaid at maturity.
