Investors overwhelmingly favoured one-year Nigerian Treasury Bills at Wednesday’s primary market auction, submitting N1.84 trillion in bids for the 364-day instrument as the Debt Management Office (DMO) lowered stop rates across all three maturities.
Subscriptions for the one-year bill reached N1.836 trillion against an offer of N600 billion, accounting for approximately 96 per cent of the N1.91 trillion in total demand recorded at the auction. Despite the strong appetite, the DMO allotted just N38.38 billion to the tenor.
The auction saw the DMO offer N800 billion across the 91-day, 182-day and 364-day instruments, while total subscriptions reached N1.91 trillion, equivalent to about 2.4 times the amount on offer. Total allotments, however, stood at N71.16 billion.
Stop rates declined across all three tenors, with the 91-day bill falling by 10 basis points to 15.40 per cent, the 182-day instrument easing by one basis point to 15.79 per cent, and the 364-day bill dropping by 10 basis points to 15.80 per cent.
The results suggest that the DMO attracted demand at slightly lower rates across the maturity spectrum, while investor interest remained heavily concentrated in the one-year instrument.
One-year bill dominates investor demand
The 364-day Treasury Bill attracted N1.836 trillion in subscriptions, significantly exceeding the N51.56 billion recorded for the 91-day instrument and the N20.27 billion received for the 182-day bill.
The shorter-dated instruments were offered at N100 billion each, while the one-year bill had an offer size of N600 billion.
The DMO allotted N22.33 billion to the 91-day bill and N10.45 billion to the 182-day instrument, alongside N38.38 billion for the 364-day bill.
The concentration of demand in the one-year tenor points to a clear preference for the longer maturity at the rates available at the auction. However, the results alone do not establish whether this reflected expectations of future interest rate movements, a preference for locking in returns or other portfolio considerations.
Stop rates fall across all maturities
The decline in stop rates was broad-based, although the adjustment was more pronounced in the 91-day and 364-day instruments than in the six-month bill.
The 91-day stop rate fell from 15.50 per cent at the previous auction to 15.40 per cent, while the 182-day rate edged down from 15.80 per cent to 15.79 per cent. The 364-day rate declined from 15.90 per cent to 15.80 per cent.
Compared with the secondary market closing yields shown in the auction data, the 91-day stop rate was 2.15 percentage points lower, while the 182-day rate was 1.36 percentage points lower. The 364-day stop rate, however, was 0.40 percentage points above its secondary market closing yield.
The contrasting movements indicate that primary market pricing differed across maturities, even as the DMO reduced the stop rates accepted at the auction.
The next auctions will provide further evidence on whether the downward adjustment in stop rates continues and whether investor demand remains concentrated in longer-dated Treasury bills.