There are expectations that interest rates will moderate this week as the pressure eases with the Nigerian Treasury Bills (NTB) worth N190.89 billion maturing in the week.
In the new week, dealers also expect the value of FGN Bonds to increase (and yields to fall) amid increased demand due to the maturing bills in the money market.
In a related development, the Debt Management Office’s (DMO) monthly bond auction, which was held last week, fell far short of the agency’s target.
As usual, the DMO sought to raise N225 billion, split equally across three maturities – the April 2029, April 2032, and April 2037 maturities. It ended up raising N108 billion out of total subscriptions of N119 billion.
The amount raised is the lowest this year and implies a sales-to-offer ratio of just 0.48x compared with 1.02x at its previous auction in September.
Although the April 2032 and April 2037 were also available at the previous auction, the March 2025 was replaced with the April 2029, which is a reopening of a previously shelved issue.
The low level of demand at the auction was largely due to the level of financial system liquidity in recent weeks following the Central Bank’s monetary tightening measures.
Experts from FBNQuest said a secondary and related factor is that the CBN has prohibited financial institutions that access its windows from taking part in bond and treasury auctions.
Marginal rates for the papers on offer were 14.5 per cent, 15.0 per cent, and 16.0 per cent for the April 2029, April 2032, and April 2037, respectively.
Relative to the prior auction, the marginal rates were about 115 basis points (bps) and c.150bps higher for the longer tenors – the April 2032s and April 2037.
Marginal rates for the three benchmarks were also around 70bps, 89bps, and 60bps higher than those on the secondary market.
The DMO has raised around N2.2 trillion from its auctions so far this year. The gross amount is about N2.5 trillion when non-competitive allotments are considered.
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