CBN eyes N900bn as one-year T-bill dominates auction

Central Bank of Nigeria building. Photo: CBN

The Central Bank of Nigeria, on behalf of the Debt Management Office, will offer N900 billion in Nigerian Treasury bills at the first auction of the fourth quarter on Wednesday, with the one-year instrument accounting for nearly four-fifths of the offer.

The auction will comprise N100bn in 91-day bills, N100 billion in 182-day bills and N700bn in 364-day bills, according to the auction notice.

Settlement is scheduled for Thursday, 8 October.

The auction comes as the government enters the final quarter with significant investor appetite for short-term sovereign securities, while Treasury bill yields have continued to decline following the CBN’s 350-basis-point reduction in the Monetary Policy Rate to 23 per cent.

The 364-day instrument accounts for 77.8 per cent of the N900 billion on offer, underscoring the DMO’s continued emphasis on longer-dated Treasury bills.

The 91-day and 182-day instruments will each account for N100bn, or 11.1 per cent of the total.

The structure means investors will have substantially more room to place funds in the one-year bill than in the shorter instruments.

The October auction will test whether the downward trend in Treasury bill yields can continue into the fourth quarter.

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At the previous auction on 23 September, the 364-day NTB attracted N4.09tn in subscriptions against the amount offered, accounting for about 97 per cent of total demand across the three tenors.

The one-year stop rate fell by 73 basis points to 15.89 per cent, while the 91-day and 182-day instruments cleared at 15.50 per cent and 15.80 per cent, respectively.

The 364-day rate has now fallen by 146 basis points over four consecutive auctions from 16.84 per cent on 2 September.

It is also 181 basis points below the third-quarter peak of 17.70 per cent recorded on 8 July.

The sizeable October offer follows an aggressive third-quarter Treasury bill programme.

The DMO allotted approximately N8.14tn across eight NTB auctions in Q3, exceeding its N5.8tn target by 40.3 per cent.

The strong allotments reflected sustained demand for government securities, particularly at the longer end of the Treasury bill curve.

The October auction will therefore provide an early indication of whether investor appetite remains strong enough to absorb another large supply of short-term government paper at declining yields.