Following consecutive spot rate cuts at the Central Bank of Nigeria’s (CBN) main market auction last week, investors reacted negatively and reduced their holdings of Nigerian Treasury Bills (NTB) in the secondary market.
The top bank offered a spot rate of up to 25% on one-year Treasury bill instruments in an attempt to draw in international portfolio investors. Since the start of the year, the total subscription levels have remained higher than the amount the apex bank has provided at different primary market auctions.
Yields on fixed-interest instruments have stayed high due to shifting market dynamics after the monetary authority raised interest rates benchmarks as part of concerted efforts to fight inflation.
This market condition has also spurred an increase investment securities from the local deposit money banks. Again, the spot rate on one-year Treasury bills was cut to size following a heavy subscription record at the CBN auction last week.
During the treasury bills primary auction, the total amount offered was N44.23 billion as CBN sought to refinance maturing bills. However, analysts noted that the auction size was less than N221.17 billion worth of Nigerian Treasury bills sold at the previous auction.
Despite its small size, investors staked NGN407.76 billion, while the apex bank allotment settled at N55.23 billion. In the previous auction, total demand was N713.89 billion, while the CBN allotted NGN278.43 billion worth of Nigerian Treasury bills to market participants.
Subsequently, the stop rate for the 92-day, 182-day, and 364-Day instruments declined marginally to 16.30%, 17.44%, and 20.50% from 16.50%, 17.50%, and 20.67% in the previous auction, respectively.
Last week, sentiment was mixed as the average treasury yield increased to 21.90% from 21.02% recorded last week, while the average bond yield remained constant at 18.76%.
