CBN’s One-Year T-Bill Oversubscribed By 259% Despite Rates Drop
Despite galloping inflation and the declining naira value, the Central Bank of Nigeria’s (CBN) Treasury Bill for one year tenor was oversubscribed by 259 percent, with yield declining -0.51 to 13.9 percent from 14.5 percent stop rate recorded in the previous auction.
At the Wednesday auction, the apex bank offered one year tenor Treasury Bill worth N139,056,966,000 which is going to mature on November 9, 2023
The auction accumulated a total subscription of N499,421,000,000 representing 259 percent higher than the intended capital raise.
However, a total of N300,162,662,000 was allotted at a yield rate of 13.9 percent which is lower than the previous 14.5 percent stop rate but within CBN’s range of bid rates of between 11.8 percent and 17 percent.
The outlook of inflation (currently at 20.8 percent as of September) is elevated after the value of the local currency crashed by more than 15 percent in the last two weeks following CBN’s announcement to redesign higher currency notes of N200, N500, and N1,000.
The depreciation is more than 15 percent in the last two weeks from N745 per dollar to about N900 per dollar.
Given a fast weakening Naira and rapidly rising inflation that has defied CBN’s aggressive mop-up measures, market watchers and analysts had expected increasing yield to compensate for the headwinds.
However, rather than increasing interest yield, the rates for one-year tenors declined while the 91-day and 192-day tenor remained unchanged at 6.5 and 8.05 percent respectively.
For the 91-day Bill, CBN offered N21.151 billion but only N15.137 was subscribed while N4.522 billion was allotted at 6.5 percent interest. The 182-day paper maturing November 11, 2023, was heavily undersubscribed as investors put down only N6.359 billion out of a total of N32.825 billion in offer. Only a total of N5.439 billion was allotted at 8.05 percent interest.
In the three tranches of the Treasury Bills auctioned at the primary market on Wednesday, November 9, the apex bank realised a total of N310,124,027,000 in allotments, higher than the target capital of N193,034,253,000 although total subscriptions amounted to N520,917,864,000.
Commenting on the negative yield results, Evans Asagwa, a fixed-income instruments investor attributed it to the mad rush by currency hoarders who are desperate to exchange the swarths of notes in their possessions.
He anticipated further decline in yield, saying more currency hoarders are likely to besiege the foreigner exchange market and the primary market auctions in the weeks ahead.
