CBN offers N900bn treasury bills in Q4 action

The Central Bank of Nigeria (CBN), on behalf of the Debt Management Office (DMO), will offer N900 billion worth of Nigerian Treasury Bills (NTBs) at its first auction of the fourth quarter on Wednesday, October 7, with the one-year instrument accounting for more than three-quarters of the offer.

The auction will comprise N100 billion in 91-day bills, N100 billion in 182-day bills and N700 billion in 364-day bills, with settlement scheduled for October 8, according to the auction notice.

The heavy allocation to the 364-day tenor reflects sustained investor appetite for longer-dated government securities, despite a broad decline in Treasury bill yields following the Central Bank’s 350-basis-point reduction in the Monetary Policy Rate to 23 per cent.

At the previous auction on September 23, the 364-day bill attracted N4.09 trillion in subscriptions—about 97 per cent of total demand—and cleared at a 15.89 per cent stop rate. The rate was down from 16.62 per cent at the preceding auction and 17.70 per cent in July.

The September auction demonstrated the extent to which investors are competing for government paper even as yields fall. Total subscriptions reached N4.23 trillion, against an offer of N600 billion, although only N497.59 billion was ultimately allotted.

Fixed-income analysts said the combination of strong liquidity and expectations of further yield compression could keep demand elevated at Wednesday’s auction.

Adeniyi Adejumobi, assistant fixed-income fund manager at FCMB, said the 350-basis-point MPR reduction had triggered further repricing across the Treasury-bill market, with investors adjusting expectations for future interest rates.

The development means investors seeking to lock in relatively attractive yields may continue to favour the one-year bill, particularly as returns are expected to come under pressure if monetary easing continues.

The CBN’s liquidity operations have also underscored strong demand for government securities. At the final September OMO auction, investors submitted N6.40 trillion in bids against about N4.69 trillion sold.

The DMO had also allotted about N8.14 trillion through eight NTB auctions in the third quarter, exceeding its N5.8 trillion target by roughly 40 per cent, largely because of exceptional demand for the 364-day instrument.

Analysts expect the October auction to provide an important test of how quickly Treasury-bill yields adjust to the new monetary-policy environment. The key indicators will be the level of subscriptions for the N700 billion one-year offer and whether the 15.89 per cent stop rate falls further.