Nigeria: Rates on Nigerian Treasury Bills Spike at CBN Auction

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The Central Bank of Nigeria (CBN) hikes spot rate pricing on Nigerian Treasury bills (NTB) auction sales conducted on Wednesday (June 7, 2023) amidst changing market dynamics; interest rate hikes and accelerating inflation.

Recall that MarketForces Africa reported that the apex was scheduled to roll over N182.85 billion worth of maturing bills on Wednesday.

The apex bank’s auction sales results showed that the stop rates for the 91-day, 182-day, and 364-day bills were all issued at higher rates. Market analysts said excess liquidity spurred massive bids across all tenors on offer as the bid-to-cover ratio printed at 4.5x.

According to the result, CBN sold 91-day bills at 4.48%, 219 basis points above the previous level of 2.29%.  Also, 182-day treasury bills was sold at 6.00%, a 101 basis points jump from the previous spot rate of 4.99%.

In addition, 364-day bills was sold at 9.45%, a 146 basis points jump from 7.99% seen at its previous auction. Ahead of the NTB auction debt, market liquidity surged by 78% to close at ₦659.87 billion. The robust liquidity in the system dragged funding rates lower.

Short-term benchmark rates moved steady as cash-rich local deposit money banks demand lower rates to part with liquidity. Data from FMDQ Exchange showed that the open repo rate (OPR) and the overnight lending rate (OVN), remained unchanged at 11.63% and 12.00%, respectively.

In the near term, analysts at TrustBanc Capital said they expect NTB auction net-off and Retail SMIS refund to keep rates at current levels, while liquidity conditions remain considerably buoyant.

In the secondary market for Nigerian Treasury bills, yield moved in mixed directions despite the rising stop rates at the CBN auction. Specifically, the average secondary market yield on T-bills closed flat at 6.35%.

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