T-bill rates rise first time in 8 weeks as investors place N265bn in successful bids

Fixed-income investors seeking high-yielding securities in the light of the prevailing developments in the markets were not disappointed, as attempts to buy the Federal Government short-term debt instruments at attractive rates were accepted.

The 364-day bill saw an increase by 5 basis points from 3.3 percent to 3.40 percent at the Nigerian Treasury Bills (T-bills) auction conducted Wednesday, July 29, by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria, as investors bid at rates as high as 12 percent.

Although marginal, the increase in the 364-day bill for July 27, 2020, is the first since the last higher stop rate was recorded some two months ago.

According to market analysts, fixed income investors are being cautious not to invest at a lower rate despite the limited investment options.

“Though the increase is marginal,” Ayodeji Ebo, MD, Afrinvest Securities Limited said “investors are being mindful of interest rate and as a result, “they didn’t submit at a significantly lower rate compared to the last auction.”

While investors were able to place N265.95 billion (the exact amount the CBN offered to raise from the auction) in successful bids, N200.75 billion were unsuccessful, a pointer that there is still high liquidity in the market amid lack of high yielding investment instruments.

A breakdown of the auction result seen by Businessday shows that stop rates on the shorter 92-day and 282-day bills dipped to 1.2 percent, and 1.5 percent, respectively. This is compared to the 1.3 percent and 1.8 percent reported in the previous auction. Meanwhile, investors were requesting for as much as 3 to 9 percent for the short term papers.

While investors jostled for the N265.95 billion the CBN sought to raise at the auction with N468.27 billion, a breakdown of the result reveals that the CBN sold N49.84 billion worth of bills for the 91-day paper. The short term instrument was subscribed by N94.39 billion, N44.55 billion more than what the apex bank offered.

N54.59 billion worth of bills were allotted on the 182-day paper. Investors were, however, willing to offer N156.79 billion, almost three times what the CBN raised, considering they oversubscribed by N102.2 billion.

Bills valued at N161.52 billion were sold on the 364-day paper but investors were willing to subscribe to the bill with N215.52 billion, N54 billion higher than the CBN’S offer.

According to market analysts, Nigeria’s low yield environment which is further worsened by the country’s high inflation rate is a key driver of the high liquidity rate in the financial system of Africa’s largest economy.

While interest rates in Nigeria have always been high due to the monetary system in vogue since 2009 which sought to use FGN bonds/tbills and OMO bills as a means of attracting US dollars into the country to stabilise the naira, the recent OMO policy by the central bank which prevents domestic investors from participating in the auction is the key driver of the recent lowinterest rates.