Treasury Bills Yields Dip as Subscription Soars at Primary Auction

Nume Ekeghe

Nigeria Treasury Bills (T-Bill) issuance witnessed a significant shift in investor appetite last week, with bids outpacing offers by a substantial margin.

During the recent T-Bills primary auction, the amount offered stood at N161.50 billion, a decrease from N337.89 billion in the previous auction.

Despite this reduction, the total subscription soared to N1.50 trillion, far surpassing the offered amount. Consequently, only N161.50 billion was allotted. Both the subscription-to-offer and bid-to-cover ratios reached 9.27x, reflecting overwhelming demand compared to supply.

As a result of this robust demand, the stop rates for the 91-day, 182-day, and 364-day instruments experienced declines. Specifically, the stop rates dropped to 16.24 per cent 17.00 per cent, and 21.12 per cent for the respective maturities. In comparison, the previous auction recorded stop rates of 17.24 per cent, 18.00 per cent, and 21.49 per cent, highlighting a downward trend in borrowing costs for investors.

A report by Meristem research noted: “The Central Bank of Nigeria (CBN) offered N161.50 billion in T-Bills at the primary auction, a decrease from the N337.89 billion offered at the previous auction.

“However, investor demand surged, with total subscriptions reaching a staggering NGN1.50 trillion. This resulted in a subscription-to-offer ratio and a bid-to-cover ratio of a remarkable 9.27x, indicating a significant oversubscription.

“Consequently, the stop rates for the 91-day, 182-day, and 364-day instruments all declined,” analysts noted. The new stop rates settled at 16.24 per cent, 17.00 per cent, and 21.12 per cent respectively, compared to 17.24 per cent, 18.00 per cent, and 21.49 per cent at the previous auction.”

The report added, “The decrease in stop rates suggests a decline in yields for government debt instruments despite a reported “bearish sentiment” in the secondary fixed-income market. The average yield for T-Bills in the secondary market rose to 19.99% compared to 18.48 per cent last week, while the average bond yield remained unchanged at 18.40 per cent.”

Furthermore, it stated: “The Nigeria Bureau of Statistics (NBS) reported a surge in the country’s total trade, which increased by 128.60 per  YoY and 42.50 per cent QoQ to N26.80trn in Q4:2023, primarily attributed to the depreciation of the Naira. However, signaling a shift, the country recorded a trade deficit of N1.40trillion for the first time in five quarters, driven by a significant increase in imports (+163.10 per cent  YoY to N14.11trillion) surpassing total exports (+99.56 per cent YoY to N12.69trillion.”