The Central Bank of Nigeria (CBN) plans to conduct a treasury operation where bills worth N220 billion will be opened for investors subscription across standard tenors. The Apex Bank will auction Nigerian Treasury bills maturing in 91, 182, and 364 days to investors with a total offer size of N220 billion on Wednesday.
The market anticipates the tiny offer size will be oversubscribed, with large bets expected from long-duration treasury papers amidst rates repricing seen across the standard tenors at the previous auction.
The authority slashed rates sharply across 91, 182 and 364 days Treasury bills at its previous auction, reflecting yield normalisation in the fixed income market. Disinflation, macro improvements and large free fund not tied to other fixed interest securities in the money market afforded rates cut as the authority seeks to reduce funding costs.
Since second half of the year, the shape of the Treasury bills yield curve began to normalised, raising risk of low earnings performance for local banks. Yields declined across almost all maturities, with the most pronounced compression at the short end of the curve on expectation of accommodative monetary policy stance.
Fixed income market analysts anticipate bullish sentiments will persisted in the secondary market as investors reprice yields downwards, aided by the liquidity surfeit and the possibility of continued curtailing of the supply of instruments by the government.
For treasury bills offers, analysts said they expect rates to taper. MarketForces Africa reported that the CBN offered bills worth N290.00 billion at the previous auction. The offer was split into N50.00 billion for Nigerian Treasury bills maturing in 91 days.
It also offered N20.00 billion for the 182 days, and N220.00 billion for the 364 days to maturity bills. Total subscription levels settled at N675.66 billion, a sharp drop from N1.33 trillion from the prior auction.
Analysts said the prior auction performance translated to a bid-to-offer ratio of 2.3x, lower than 6.6x at the prior auction. The auction closed with the CBN allotting exactly what was offered. Nigerian Treasury bills with 91 day maturity worth N13.11 billion was allotted at 15%, down from 15.74%.
Nigerian Treasury bills with 182 days maturity worth N5.10 billion was allotted at 15.50%, down from 16.20% and N271.79 billion was raised from 364 days papers at 15.88%, down from 16.30% at previous auction OMO Bills Yield Climbs to 24.70%, CBN Opens Auction
