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The Debt Management Office (DMO) has rejected N1.84 trillion in investor bids for Nigerian Treasury Bills, allotting just N71.16 billion out of N1.908 trillion in subscriptions at Wednesday’s auction.
This was as it lowered the one-year interest rate to 15.80 per cent.
The move signals the government’s preference for limiting borrowing costs rather than accommodating investors demanding higher yields, despite overwhelming demand for the short-term debt instruments.
Data from the October 28 auction, conducted through the Central Bank of Nigeria (CBN), showed that subscriptions were 2.38 times the N800 billion on offer, but the authorities accepted only a fraction of the bids, leaving approximately N1.837 trillion unallotted.
The 364-day Treasury Bill accounted for almost all the rejected subscriptions, underscoring the gap between investors’ yield expectations and the rates the government was willing to pay.
Investors submitted N1.84 trillion in bids for the one-year instrument against an advertised offer of N600 billion. However, the DMO allotted just N38.38 billion, equivalent to about 2.09 per cent of total subscriptions for the tenor.
Bids for the 364-day bill ranged from 15.00 per cent to 18.24 per cent, but the stop rate settled at 15.80 per cent, down 10 basis points from 15.90 per cent at the October 14 auction.
The latest reduction reversed the five-basis-point increase recorded at the previous auction and extended the decline from the 17.59 per cent recorded in August.
The outcome marks the second consecutive auction at which the DMO has rejected the bulk of investor subscriptions, signalling a tighter approach to accepting borrowing rates amid abundant liquidity in the banking system.
At the October 14 auction, the authorities left about 74 per cent of bids unallotted, while raising the one-year stop rate to 15.90 per cent.
Wednesday’s auction also saw the government raise significantly less than its advertised target. Against the N800 billion offer, the DMO allotted N71.16 billion, leaving N728.84 billion of the planned issuance unraised.
The 91-day bill attracted N51.56 billion in subscriptions against an offer of N100 billion, with N22.33 billion allotted at a stop rate of 15.40 per cent.
For the 182-day instrument, subscriptions stood at N20.27 billion against N100 billion offered, while N10.45 billion was allotted at 15.79 per cent.
The stop rates declined across all three tenors, with the 91-day rate falling to 15.40 per cent and the 182-day rate settling at 15.79 per cent, leaving just one basis point between the six-month and one-year instruments.
The latest outcome contrasts with the October 7 auction, when the DMO allotted N968.47 billion against an advertised offer of N900 billion, with the one-year stop rate at 15.85 per cent.
The reduction in borrowing rates also comes against the backdrop of increased liquidity in the banking system, which rose to N8.59 trillion before Wednesday’s auction from N6.94 trillion at the close of the previous week.
The increase was supported largely by N2.13 trillion in Open Market Operations (OMO) maturities, providing additional funds for investment in government securities.
However, the CBN’s OMO auction on October 22 attracted a different pricing outcome, with N2.63 trillion sold across the 138-day and 180-day instruments against an offer of N2 trillion. The instruments cleared at 17.63 per cent and 17.14 per cent, respectively, above the Treasury Bills stop rates recorded on Wednesday.
In the secondary market, the average Treasury Bills yield declined to 17.47 per cent on October 27 from 18.21 per cent on October 14, according to the supplied market figures.
The latest auction further extends the decline in one-year Treasury Bills rates from the 17.59 per cent recorded in August, when investors submitted N4.4 trillion in bids against an offer of N700 billion.
By September 9, the one-year stop rate had fallen to 16.62 per cent before declining further in subsequent auctions.
Despite the strong demand for Treasury Bills, the latest figures suggest that the DMO is unwilling to meet investor yield expectations at the expense of lower borrowing costs.
The rejected subscriptions may subsequently flow into secondary-market Treasury Bills, OMO instruments or other investments, depending on investors’ preferences and prevailing market conditions.
