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Investors Bid N1.08 Trillion for Nigeria’s One-Year Bills but Shun Shorter Tenors
The 364-day bill drew 179.85% of its N600 billion offer at the 11 November auction, while the 91-day and 182-day bills were less than a quarter covered.
ABUJA – Investors piled into Nigeria’s one-year Treasury bill again at the 11 November auction, bidding N1.08 trillion for the 364-day paper while largely ignoring the shorter tenors, according to results reported by Nairametrics.
Highlights
- Investors bid N1.08 trillion for Nigeria’s 364-day Treasury bill on 11 November, 179.85% of the N600 billion offered.
- The 91-day and 182-day bills drew just N19.18 billion and N23.02 billion against N100 billion each.
- The CBN allotted N713.31 billion of the N800 billion offered, including N672.91 billion of one-year paper.
- The 364-day stop rate rose nine basis points to 15.89%, while the shorter rates were unchanged.
The bids for the 364-day bill came to N1.079 trillion, or 179.85% of the N600 billion on offer, at the auction run by the Central Bank of Nigeria (CBN) for the Debt Management Office (DMO). The one-year bill accounted for about 96.2% of total subscriptions of roughly N1.12 trillion.
The shorter bills struggled. The 91-day bill attracted N19.18 billion against N100 billion offered, about 19.2% cover, and the 182-day bill drew N23.02 billion, about 23%.
Allotments and rates
The CBN allotted N713.31 billion against the N800 billion advertised, leaving N86.69 billion unallotted. It sold N672.91 billion of the 364-day bill, N72.91 billion more than offered, against N18.12 billion of 91-day and N22.28 billion of 182-day paper. The one-year bill took about 94.3% of allotments.
The 364-day stop rate rose nine basis points to 15.89% from 15.80% at the previous auction. The 91-day and 182-day rates were held at 15.40% and 15.79%.
That leaves the one-year bill paying only 49 basis points more than the 91-day bill and 10 basis points more than the 182-day bill. Investors are accepting six to nine months’ more duration for little extra yield.
A familiar pattern
Demand has concentrated in the one-year bill for weeks. At the 4 November auction, the 364-day bill drew N1.994 trillion in bids, against N25.01 billion for the 91-day and N25.83 billion for the 182-day instruments, Nairametrics reported. The one-year paper also took about 96% of subscriptions at the 9 September sale.
The DMO offered N800 billion this week against N148.565 billion of bills maturing on 12 November, so the auction raised fresh borrowing well above what was falling due.
Why it matters
One reading of the heavy one-year demand and flat yield curve is that investors see little chance of higher rates soon and want to lock in yields near 15.9% for a year. For the government, steady demand keeps short-term funding costs contained while it seeks lawmakers’ approval for N10.79 trillion of external borrowing.
What to watch
Whether the CBN keeps nudging up the one-year rate at coming auctions will show how hard it is leaning against the bids, and how much fresh net borrowing it is prepared to take on.
Written by
Tumisang Bogwasi
Tumisang Bogwasi, Founder & CEO of Brimco. 2X Award-Winning Entrepreneur. It all started with a popsicle stand.
