Investors are increasingly favouring longer-term government securities, with the latest Treasury bills auction by the Central Bank of Nigeria indicating strong appetite for the one-year instrument.
Gatekeepers News reports that at Wednesday’s primary market auction, investors submitted N3.63tn for the 364-day Treasury bill, accounting for 95.9 per cent of the N3.79tn total bids received across the three maturities.
The strong demand came despite the CBN lowering the stop rate on the one-year instrument by 44 basis points to 17.15 per cent, from 17.59 per cent at the previous auction.
The auction results indicate a marked shift in investor preference towards longer-dated government securities, while demand for shorter-tenor instruments remained relatively weak.
The CBN had offered N700bn across the three maturities, comprising N100bn each for the 91-day and 182-day bills and N500bn for the 364-day instrument.
However, total subscriptions reached approximately N3.79tn, representing more than five times the amount offered.
The 364-day bill emerged as the clear favourite, attracting bids equivalent to 7.26 times the amount on offer.
The apex bank ultimately allotted N638.19bn on the instrument, exceeding the initial N500bn offer by N138.19bn. Despite the additional allotment, only about 17.6 per cent of total bids submitted for the bill were accepted.
Investors quoted yields ranging from 16.00 per cent to 19.05 per cent, but the CBN settled at 17.15 per cent, suggesting that strong demand enabled the regulator to reject higher-priced bids.
The outcome is significant because the CBN was able to raise more funds than initially planned at a lower borrowing rate despite exceptionally strong demand for the security.
At the shorter end of the curve, the 91-day bill attracted N103.32bn in subscriptions against N100bn offered. The CBN allotted N89.10bn at an unchanged stop rate of 16.30 per cent.
The 182-day bill recorded weaker demand, attracting N52.93bn against N100bn offered. The CBN allotted N35.59bn, while the stop rate remained unchanged at 16.50 per cent.
In the secondary market, yields on the three instruments stood above their respective auction stop rates, at 17.45 per cent for the 91-day bill, 17.05 per cent for the 182-day bill and 17.24 per cent for the 364-day bill.
A financial sector analyst, Jimbe Asalor, said the concentration of bids in the one-year instrument suggested that investors were placing greater value on locking in relatively attractive yields over a longer period rather than repeatedly rolling over shorter-term securities.
He noted that the auction also demonstrated “the CBN’s ability to borrow more cheaply when demand is concentrated around a particular maturity.”
Asalor added that by accepting N638.19bn on the 364-day bill at 17.15 per cent, the CBN borrowed above its initial offer while simultaneously cutting the rate by 44 basis points.
“The nine-basis-point difference between the auction stop rate and the 17.24 per cent secondary-market yield also indicates that the one-year segment is now trading relatively close to market expectations,” he said.
A Lagos-based consultant economist, Chukwunonso Iheoma, said sustained preference for longer-dated Treasury bills could support a gradual decline in government borrowing costs and strengthen expectations of eventual interest-rate cuts.
