CBN borrows N120bn via treasury bills

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The Central Bank of Nigeria says it has borrowed N119.92bn ($600m) via Treasury bills with maturities from three months to a year at an auction last Wednesday.

The yields on the T-bills were further reduced compared with the returns at previous auctions.

The result of the auction showed that the CBN sold N32.43bn worth of three-month paper at 5.34 per cent compared with 5.82 per cent at the November 4 auction.

It also sold N22.82bn worth of six-month debt at 7.2 per cent against 7.98 per cent previously, and N64.67bn of one-year paper sold at 8.5 per cent, down from 9.48 per cent, the auction results showed.

Total demand for the paper also dropped to N301.04bn compared with N535.86bn demanded by investors at the last auction.

Traders said the drop in yields was a reflection of trends in the secondary market, where yields had fallen to 1.94 per cent, 6.16 per cent and 6.93 per cent for three-month, six-month and one-year debt, respectively, Reuters reported.

The CBN has been injecting cash into the money markets since September in a bid to ease liquidity and reverse declining growth in Nigeria, which has suffered as oil prices fell sharply since mid-2014,

Traders said the CBN had not issued open market bills in three months in a bid to keep borrowing costs low, causing a liquidity surge which has shrunk bond yields to more than five year lows for some maturities.

Meanwhile, the interbank lending rate held steady for the second consecutive period last week at 0.5 per cent after the CBN injected matured Open Market Operation bills into the system.

Traders said about N179bn in matured OMO bills were injected into the system two weeks ago.

Traders had said that although about N70bn for bond purchases and N18bn debited for cash reserve requirements left the system two weeks ago, the market remained substantially liquid.

Two weeks ago, the 2017 bond had spiked 341 basis points to 10.43 per cent as traders booked profits anticipating that the CBN might resume OMO sales this week after the inauguration of ministers signalled a clearer outlook for government spending.

The five-year bond, which was quoted at 15 per cent at the start of April, had yielded 6.9 per cent last Tuesday. The 10-year benchmark bond yield rose by 136 basis points to 11.62 per cent on the sell-off.

Vice President Yemi Osinbajo had proposed a budget of N7tn to N8tn ($40.2bn) for 2016, up from N4.4tn this year, but did not say how it would be funded.

Source: Punch