The Debt Management Office (DMO), acting on behalf of the Central Bank, held a primary market auction (PMA) last week when the spot rate on Nigeria’s 364-day Treasury bills was increased to 21.24%.
Prior to this week’s inflation figures, the rate increase was intended to increase investors’ interest in naira assets. The DMO put up N166.11 billion for refinancing at auction. The Nigerian Treasury bills with 91 days, 182 days, and 364 days each had an offer bucket of N27.11 billion, N1.49 billion, and N137.50 billion, respectively.
Fixed-interest securities experts cited the auction results to report that the aggregate subscription closed lower at N308.66 billion, or 1.9 times the bid-to-offer compared to the previous auction. Analysts stated that investors aimed to invest a substantial sum at the previous auction with a total subscription of N773.98 billion, which resulted in a bid-to-offer of 3.4x.
DMO allotted bills worth N207.27 billion to investors, resulting in lost bids that later filtered into the secondary market. According to auction results, the authority allotted NGN28.47 billion for the 91-day bills to investors and market participants. Also, the DMO allotted NGN9.16 billion for the 182-day bills to authorised dealers and NGN169.64 billion for the 364-day papers.
Rates were steady at the short end and belly of the curve, according to the primary market auction results. The results revealed the authority priced the 91-day bill at a spot rate of 16.33%, the same rate offered at the previous auction.
Spot rate pricing for 182-day Treasury bills was also steady at 17.44%, the same rate offered at the previous auction. The authority raised the spot rate on 364-day Treasury bills to 21.24% from 20.68%.
In the secondary market, bearish sentiments persisted following notable sell pressures on mid-dated papers amid pockets of post-auction demand from participants who lost out at the primary market auction last week, Cordros Capital Limited told investors in a note.
At the close of business, the average yield across all instruments expanded by 32 basis points to 23.7% as investors offloaded naira assets in the secondary market in a bid to boost liquidity levels in the financial system. Following the selloffs, the average yield advanced by 57 basis points to 23.3% in the Treasury bills space but contracted by 11 basis points to 24.2% in the OMO bill segment.
“We expect mixed activities in the Treasury bills secondary market, as the modest liquidity in the financial system might be insufficient to drive strong demand for bills and cause yields to fall significantly,” Cordros Capital Limited said in its update.
