The Central Bank of Nigeria (CBN) on Thursday auctioned a total of N400 billion Treasury bill through Open Market Operation (OMO), being the first in the week since last week Thursday.
The results of the OMO auction show that N100 billion was offered for 105 day tenor at the stop rate of 10.9 percent. The offer which matures on August 2, 2018 was under subscribed by N30.3 billion with a total sale of N27.6 billion.
For longer days tenure of 245 days, the Apex bank offered the sum of N300 billion to investors who paid a total of N472.4 billion at the stop rate of 11.95 percent. The offer which was oversubscribed by N856.7 billion will mature in December 20, 2018.
“There is a lot of liquidity in the system since the CBN has not been mopping up and rates have been dropping significantly”, said Ayodeji Ebo, managing director Afrinvest Securities limited.
The last OMO auction by the CBN was held in April 12, 2018 where a total of N500 billion treasury bills were offered to investors.
Godwin Emefiele, governor of CBN had noted that the regulator embarked on a cycle of policy tightening to rein in inflation using increasing Monetary Policy Rate (MPR) and aggressive Open Market Operations.
Last week Thursday, system liquidity opened at a significantly higher level of N1.1 trillion, necessitating N500.0 billion OMO mop-up by the CBN across 112-day for N100.0 billion offer, it was subscribed by N1.2 billion, and N1.2 billion, was allotted at marginal rate of 12.2 percent. It offered N400.0 billion for 245 days tenor. It was subscribed by N963.9 billion, allotted: N498.7 billion, at the rate of 13.99 percent maturities.
The Open Buy-Back (OBB) and Overnight (OVN) rates inched 0.3ppts and 0.5ppts higher to 3.0 percent and 3.8% respectively.
“As the impact of a moderating inflation continues to anchor yield expectation, we anticipate more subscriptions in longer tenored instruments as investors lock in higher rates ahead of yield moderation”, analysts at Afrinvest said.
In the Treasury Bills market, performance was largely flattish as average rate across benchmark tenors trended higher albeit marginally on 3 of 5 trading sessions save for Tuesday. The bearish start of the week, with average rate rising 2bps to 13.1 percent, had been reversed on Tuesday following 4bps decline in average yield; but rose 3bps mid-week in the absence of a Primary Market Auction and stayed flattish till the end of the week. Rates closed 17bps lower by weekend.
“We anticipate a largely bullish performance in the Treasury Bills Market sequel to the reduction in the amount to be rolled over in line with the planned reduction and substitution of expensive domestic short term debt with cheaper long term foreign debt by the Federal Government”, the analysts said.
A total of N116.9bn across the 91-day, 182-day and 364-day instruments will be maturing while only N58.4bn is scheduled to be rolled over.