Nigerian treasury notes continue to rise ahead of the Central Bank of Nigeria’s (CBN) midweek main market auction. In the secondary market, the average yield fell by seven basis points to 8.2%.
The Central Bank of Nigeria (CBN) will roll over N13.58 billion in maturing bills throughout the short, mid, and long end of the curve. The CBN would sell N8.50 billion in 91-day notes to the market.
A total of N1.28 billion in subscriptions for 182-day bulls will be available, while a total of N3.80 billion in 364-day bills would be available to market participants.
Remember that at the previous auction, stop rates fell below market expectations. The 91-day bill spot rate dropped a basis points to 6.49%. At the midpoints, the spot rate on 182-day bills declined five basis points to 8%.
Meanwhile, the spot rate on 364-day bills fell by 145 basis points to 13.05% as the market compensated for prior higher pricing. Meristem Securities analysts noted in a report that the drop in the stop rate is due to a demand glut.
According to a plethora of analyst comments, the subscription-to-offer ratio climbed across the tenors to 3.39x, 1.47x, and 14.05x, up from (0.37x, 0.07x, and 2.47x at the previous auction), indicating increasing investor appetite.
As a result, the overall subscription-to-offer ratio jumped to 13.40x, up from 1.69x in the previous auction. According to analysts’ notes, the bid-to-cover ratio climbed to 6.98x from 1.69x in the last auction, although Meristem Securities anticipates stop rates on the instruments to moderate.
Analysts said the expectation is premised on the low amount that will be offered compared with N54.45 billion opened for subscription previously; which could prompt oversubscription similar to the last auction.
