CBN’s N88 billion treasury bill auction yesterday was oversubscribed by 174.62%

The Central Bank of Nigeria’s (CBN) Treasury Bills Auction worth N88.46 billion was oversubscribed by 174.6% yesterday. The stop rates for the 91 and 182-day tenor bills fixed at 2.00% and 3.50% respectively.

The stop rate of the 364-day tenor bill was pegged at 9.75% according to the result of the NTB auction.

The apex bank recorded N242.94 billion in total subscription, as the treasury bill auction was oversubscribed by 174.62%, however, T-bills worth N88.46 billion were provided across the 91-day, 182-day and 364-day tenors at the primary auction.

At the end of the auction, bills worth about N129.46 billion were allotted to investors.

READ: CBN’s N154.38 billion T-bills auction over subscribed by 46% as rates fall marginally  

Demand for Treasury Bills Surge

Demand for Treasury Bills has surged in recent months as yield-hungry investors scamper away from equities into risk-free government securities. While 2020 was marred with ultra-low interest rates on fixed income securities like Treasury Bills, yields have spiked in recent weeks to the surprise of investors.

With inflation rate galloping past 18% the pressure to flee the naira appears to have forced the central bank to revise its monetary policy strategy, allowing rates to rise.

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Summary of the NTB Auction today

The 91-day bill was undersubscribed by 7.51% as it received a subscription of N10.53 billion, against an initial offer of N11.39 billion.

The 182-day tenor bill on the other hand performed well, as it was oversubscribed by 50.87% with an impressive subscription of N9.05 billion which was received yesterday, against an offer of N223.35 billion.

The 364-day tenor bill recorded the highest subscription with an oversubscription rate of 214.25%, as investors’ total subscription was valued at N223.35 billion, relative to an initial offer of N71.07 billion.

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The breakdown of the allotment

At the close of the auction yesterday, about N7.19 billion of the 91-day tenor bill was allotted, lower than the initial offer of N11.39 billion, while N6 billion worth of the 182-day bill was allotted to investors.

With the settlement for the bill pegged for the 29th of April 2021, about N116.27 billion of the 364-day tenor bill was also allotted to investors.

The oversubscribed bills confirm the huge demand for risk-free government securities amidst a dearth of sizeable investment funds.

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What you should know

• The treasury bills were auctioned in a Dutch auction structure, as the price of the offerings were set after bids were received to determine the highest price at which the total offering could be sold.
• This provided investors with the opportunity to place bids for the amount they were willing to buy in terms of quantity and price.
• The range of bids was placed at 1.99 and 10.00 for the 91-day tenor; 3.49 and 10.00 for the 182-day tenor, 8.8943 and 15.00 for the 364-day tenor.