Due to the ban of individuals and domestic corporates from purchasing Open Market Operation (OMO) bills by the Central Bank Of Nigeria (CBN), demand on the Nigerian Treasury Bills (“NT-Bills”) surged further both in the primary and secondary markets last week.
According to a report by Afrivest, the CBN’s policy on Open Market Operation (“OMO”) bills reined in on available money market investment options.
Coupled with investors bias towards this policy, robust system liquidity levels (c.N381.0 billion as at Friday) buoyed demand amidst the Primary Market Auction (“PMA”) on Wednesday as well as the CBN intervention at the OMO auction on Thursday.
As a result, average yield across tenors declined by 36bps W-o-W to settle at 12.4 percent last Friday. Notably, major buying interests were witnessed at the medium and long dated tenors, particularly, 16-Jul-20 (-217bps), 11-Jun-20 (-158bps) and 1-Oct-20 (-155bps) maturities.
At the PMA, the Apex bank offered N132.5 billion worth of T-Bills as against the N565.6 billion total subscription, translating to a bid to cover ratio of 4.3x (vs. the 5.2x recorded at the previous auction).
All tenors were oversubscribed with the 182 and 364-day instruments enjoying the most buying interest relative to available offer at 4.7x bid to cover ratio. Consequently, the stop rates across all tenors declined by 130bps, 55bps and 144bps respectively.
In addition, the CBN conducted an OMO auction on Thursday, offering a total of N330.0 billion across the 96day, 187day and 362day instruments. The short and medium tenor instruments were undersubscribed at 0.3x and 0.2x respectively while the longer tenor bill was oversubscribed at 1.8x.
Subsequently, the Apex bank allotted a total of N363.09 across all three tenors with stop rates clearing at 11.6 percent, 11.8 percent and 13.3 percent respectively.
It could be recalled that the Apex bank directive limits the purchase of OMO bills in the primary and secondary market to foreign investors, thus prompting local investors, especially the PFAs, to search for alternatives such as NT-Bills and FGN Bonds.