Investors Favour One-Year T-Bills as CBN Cuts Stop Rate to 17.15%

Investors are increasingly positioning for longer-term returns in Nigeria’s fixed-income market, with the latest Treasury Bills auction showing overwhelming demand for the one-year government security.

At the Central Bank of Nigeria’s (CBN) primary market auction on Wednesday, investors submitted N3.63tn for the 364-day Treasury Bill, accounting for 95.9 per cent of the N3.79tn total bids received across the three maturities.

The strong demand came despite the CBN cutting the stop rate on the one-year instrument by 44 basis points, from 17.59 per cent at the previous auction to 17.15 per cent.

The auction results point to a clear shift in investor appetite towards longer-dated government securities, while demand for shorter-tenor instruments remained relatively weak.

One-Year Bill Attracts N3.63tn Demand

The CBN offered a total of N700bn across the three maturities, comprising N100bn each for the 91-day and 182-day bills and N500bn for the 364-day bill.

Despite the N700bn offer, total subscriptions surged to approximately N3.79tn, representing more than five times the amount offered.

The 364-day instrument was the clear standout, attracting bids worth 7.26 times the amount offered.

The CBN ultimately allotted N638.19bn through the one-year bill, exceeding its initial N500bn offer by N138.19bn. However, only about 17.6 per cent of total bids submitted for the instrument were accepted.

Investors quoted yields between 16.00 per cent and 19.05 per cent, but the CBN settled at 17.15 per cent, indicating that the strong demand enabled the regulator to reject higher-priced bids.

Shorter-Dated Bills See Weak Demand

The preference for the one-year instrument stood in sharp contrast to demand for the shorter-tenor securities.

The 91-day Treasury Bill attracted N103.32bn in subscriptions against N100bn offered. The CBN allotted N89.10bn, leaving the stop rate unchanged at 16.30 per cent.

Demand was weaker for the 182-day bill, which received just N52.93bn in bids against N100bn on offer. The CBN allotted N35.59bn, while the stop rate remained at 16.50 per cent.

In the secondary market, yields stood at 17.45 per cent for the 91-day bill, 17.05 per cent for the 182-day bill and 17.24 per cent for the 364-day instrument.

Investors Lock in Longer-Term Yields

Financial sector analyst Jimbe Asalor said the concentration of bids in the one-year instrument suggests investors are placing greater value on locking in relatively attractive yields over a longer period rather than repeatedly rolling over shorter-term securities.

The auction also demonstrated the CBN’s ability to secure cheaper funding when demand is heavily concentrated around a particular maturity.

By accepting N638.19bn on the 364-day bill at a 17.15 per cent stop rate, the CBN borrowed above its initial offer while simultaneously reducing the rate by 44 basis points.

Asalor noted that the relatively narrow difference between the auction stop rate and the 17.24 per cent secondary-market yield suggests that the one-year segment is trading close to prevailing market expectations.

Meanwhile, Lagos-based consultant economist Chukwunonso Iheoma said sustained preference for longer-dated Treasury Bills could support a gradual decline in government borrowing costs and strengthen expectations of eventual interest-rate cuts.

The latest auction therefore signals growing investor confidence in longer-term fixed-income instruments, while giving the CBN room to manage borrowing costs as market demand increasingly shifts towards the longer end of the yield curve.