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DMO Rejects ₦1.84trn Treasury Bill Bids As One-Year Rate Falls To 15.80 Percent
DMO Rejects ₦1.84trn Treasury Bill Bids As One-Year Rate Falls To 15.80 Percent
The DMO allotted just ₦71.16bn from ₦1.908trn in bids at the October 28 Treasury Bills auction, rejecting about ₦1.84trn.
The 364-day stop rate fell by 10 basis points to 15.80 percent despite bids reaching 18.24 percent.
Banking-system liquidity rose to ₦8.59trn, while the average secondary-market Treasury Bills yield declined to 17.47 percent.
October 29, () – The Debt Management Office rejected approximately ₦1.84 trillion in investor subscriptions at Wednesday’s Nigerian Treasury Bills auction, allotting just ₦71.16 billion as the one-year stop rate declined to 15.80 percent.
Investors submitted ₦1.908 trillion in bids against an advertised offer of ₦800 billion, representing subscription coverage of 2.38 times the amount offered. However, the authorities accepted only about 3.7 percent of total subscriptions, leaving most investors without allotments.
The auction, conducted through the Central Bank of Nigeria, marked the second consecutive session in which the DMO rejected a substantial proportion of bids, signalling its willingness to limit borrowing rather than accommodate investors’ higher yield expectations.
At the October 14 auction, the DMO rejected about 74 percent of subscriptions, while the 364-day stop rate rose by five basis points to 15.90 percent. Wednesday’s outcome reversed that increase, with the rate falling by 10 basis points.
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One-Year Bills Account For Most Rejected Bids
The 364-day instrument attracted ₦1.84 trillion in subscriptions against an advertised offer of ₦600 billion, reflecting demand of approximately 3.06 times the amount offered.
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Despite the strong demand, the DMO allotted only ₦38.38 billion, accepting just about 2.1 percent of subscriptions for the longest tenor.
Investors submitted bids ranging from 15.00 percent to 18.24 percent, but the stop rate settled at 15.80 percent, 244 basis points below the highest bid.
The 91-day bill attracted ₦51.56 billion against an offer of ₦100 billion, with ₦22.33 billion allotted at a stop rate of 15.40 percent.
For the 182-day instrument, subscriptions stood at ₦20.27 billion against an offer of ₦100 billion, while the DMO allotted ₦10.45 billion at 15.79 percent.
The 364-day bill accounted for approximately ₦1.798 trillion of rejected subscriptions, compared with about ₦29.22 billion for the 91-day instrument and ₦9.82 billion for the 182-day bill.
The accepted amount was also significantly below the planned issuance. Against the ₦800 billion advertised offer, the DMO raised only ₦71.16 billion, leaving ₦728.84 billion of the offer unallotted.
Stop Rates Fall Despite Strong Demand
Treasury bills a representation of government securities Photo credit Shutterstock
The decline in the one-year stop rate extends a broader downward movement in Treasury Bills yields from the levels recorded in August.
At the October 7 auction, the DMO allotted ₦968.47 billion against an advertised offer of ₦900 billion, while the 364-day stop rate settled at 15.85 percent.
In August, the one-year rate reached 17.59 percent amid bids totalling ₦4.4 trillion against an offer of ₦700 billion. The latest rate is 179 basis points below that level.
By September 9, the 364-day stop rate had fallen to 16.62 percent before rising temporarily to 15.90 percent at the October 14 auction.
Wednesday’s auction also produced lower stop rates across all three tenors. The 91-day rate settled at 15.40 percent, the 182-day rate at 15.79 percent and the 364-day rate at 15.80 percent.
The narrow gap between the six-month and one-year rates suggests that investors received little additional yield for committing funds over the longer period at the primary auction.
The results indicate that the DMO was unwilling to accommodate all the yields sought by investors, particularly on the one-year bill.
However, the extent to which the lower stop rates will persist depends on subsequent issuance decisions, market liquidity and competing investment opportunities.
Liquidity Supports Demand For Government Securities
A representation of OMO Photo credit Shutterstock
Banking-system liquidity rose to ₦8.59 trillion before Wednesday’s auction, from ₦6.94 trillion at the close of the previous week on October 23.
The increase was supported largely by ₦2.13 trillion in Open Market Operations maturities, which returned funds to the banking system and supported demand for government securities.
At the October 22 OMO auction, the CBN sold ₦2.63 trillion in bills across the 138-day and 180-day tenors, exceeding its initial ₦2 trillion offer.
The instruments cleared at stop rates of 17.63 percent and 17.14 percent, respectively.
Meanwhile, the average secondary-market Treasury Bills yield fell to 17.47 percent on October 27 from 18.21 percent on October 14, according to the supplied market figures.
The secondary-market movement suggests that investors were accepting lower yields on average, although individual securities continued to trade at different rates depending on their maturities and market demand.
The combination of substantial banking-system liquidity and declining secondary-market yields provided a supportive backdrop for the primary auction. Nevertheless, the DMO’s decision to allot only a fraction of subscriptions shows that abundant investor funds did not automatically translate into higher government borrowing.
For investors whose bids were rejected, alternative opportunities include secondary-market Treasury Bills and OMO instruments, depending on prevailing yields, access, and investment preferences.
The key question for subsequent auctions is whether the DMO will continue prioritising lower borrowing rates over raising the full amount advertised, or adjust its stop rates if investor demand shifts towards higher yields.
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