The Central Bank of Nigeria (CBN) allotted N1.49 trillion at its June 17 Treasury bills primary market auction, hiking stop rates sharply across all three tenors. This move comes as Nigeria’s inflation rate of 15.93% in May continues to influence fixed-income market expectations, driving investor demand for higher compensation on government debt.
Investors responded by piling into the one-year instrument, seeking yields not seen in recent auction cycles. Total subscriptions reached N1.863 trillion against an offer size of N1 trillion, a bid-to-offer ratio of 1.9x. The CBN allotted significantly above the original offer size to absorb excess system liquidity.
Stop rates expanded across all three instruments compared to the June 3 auction. The 91-day bill's stop rate rose to 16.28% (up 23 basis points from 16.05%), the 182-day bill's stop rate increased to 16.50% (up 31 basis points from 16.19%), and the 364-day bill saw the sharpest increase, with its stop rate climbing to 17.34% (up 99 basis points from 16.35%).
The 364-day bill accounted for approximately 89.3% of total subscriptions and 86.6% of total allotments, highlighting a clear investor preference for longer-duration instruments. The 99-basis points rate hike for the 364-day bill is the largest single-tenor move across consecutive auctions this year, reflecting market pricing for persistent inflation and the likelihood of sustained elevated interest rates.
The 182-day bill was the only undersubscribed instrument, with subscriptions reaching N70.22 billion, or 70.2% of the N100 billion on offer. Investors have consistently shown a preference for either the short-term liquidity of the 91-day bill or the superior yield of the 364-day instrument.
The June 17 NTB auction marks the second consecutive cycle where stop rates have risen across all three tenors, reaching new highs in primary market yields after a period of relative stability. The 364-day bill’s stop rate of 17.34% is now the most attractive yield in the government’s direct securities market.
The N1.491 trillion allotment, 49.1% above the N1 trillion offer size, demonstrates the CBN's willingness to absorb excess banking system liquidity at prevailing market rates. Broader fixed-income yields have been trending upwards, with average T-bill yields in the secondary market settling in the 16.5% –17.89% range. The average bond market yield also surged 7 basis points to approximately 16.89% as of June 17.
The CBN's Monetary Policy Rate remains at 26.50%, maintaining a significant spread above Bonds and NTB rates, reflecting the apex bank’s tight monetary stance.
