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The Nigerian treasury bills continue to rally ahead of the Central Bank of Nigeria’s (CBN) primary market auction scheduled for midweek. In the secondary market, the average yield declined further, down by seven basis points to 8.2%.
The Central Bank of Nigeria (CBN) will roll over maturing bills worth N13.58 billion across the short, mid and long end of the curve. For 91-day bills, the CBN will be offering N8.50 billion worth to the market.
A total of N1.28 billion for 182-day bulls will be open for subscriptions while the sum of N3.80 billion worth of 364-day bills will be offered to a market participant.
Recall that at the last auction, stop rates dropped against market expectations. The spot rate on the 91-day bills fell a basis points to 6.49%. At the midpoints, the spot rate on 182-day bills declined five basis points to 8%.
Meanwhile, the spot rate for 364-day bills saw a significant drop, falling by 145 basis points to 13.05% as the market corrected previous higher pricing. In a note, analysts at Meristem Securities said the decline in the stop rate is attributed to a demand glut.
A slew of analysts’ notes show that the subscription-to-offer ratio increased across the tenors to 3.39x, 1.47x and 14.05x from (0.37x, 0.07x and 2.47x at the prior auction) respectively, signalling increased investors’ appetite.
Hence, total subscription-to-offer ratio increased to 13.40x as against 1.69x in the last auction. Also, the bid-to-cover ratio increased to 6.98x relative to 1.69x recorded in the previous auction, according to analysts’ notes while Meristem Securities said it expects a moderation in stop rates on the instruments.
Analysts said the expectation is premised on the low amount that will be offered compared with N54.45 billion opened for subscription previously; which could prompt oversubscription similar to the last auction.
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