CBN Treasury Bill sales draw strong demand as rates climb, signaling investor caution

The Central Bank of Nigeria (CBN) recorded a robust demand for its treasury bills this week, with total subscriptions far exceeding the amount offered, reflecting heightened investor appetite amid rising interest rates.

The latest auction, held on October 9, 2024, saw offers for tenors of 91-day, 182-day, and 364-day bills.

In the 364-day auction, the CBN offered N30.76 billion but received a staggering N251.68 billion in subscriptions.

Of this, N65.03 billion was successfully allocated, with the marginal rate climbing to 19.864%, up from 19.0% in the previous auction held on September 25, 2024.

This marked a sharp rise in demand for long-tenor bills, driven by investors seeking to lock in higher yields amid concerns over inflation and naira depreciation.

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The 91-day and 182-day bills also garnered significant attention. The CBN offered N28.47 billion in 91-day notes, receiving N16.27 billion in subscriptions, of which N12.96 billion was sold at a marginal rate of 17.0%, stable from the last auction.

Meanwhile, for the 182-day bills, N22.67 billion was offered, attracting N5.32 billion in bids, with N3.91 billion successfully sold at a marginal rate of 17.5%.

Trends and Outlook

The consistent rise in successful bid rates across all tenors points to a tightening monetary policy environment, with investors adjusting expectations amid rising inflation and currency pressures.

The sharp demand for the 364-day bills suggests that market participants are hedging against further economic uncertainty, favouring longer-term securities that offer higher returns in the face of volatile market conditions.

Looking ahead, the CBN is likely to maintain an upward trajectory in interest rates, especially as inflationary pressures persist and global economic uncertainties impact local financial markets.

Investors may continue to favour long-term treasury bills, seeking to capitalize on higher yields as short-term economic challenges—such as fuel price hikes and currency depreciation—linger.