The interest rates on treasury bills have crashed further, closing in the single digit region at the end of the Primary Market Auction on Wednesday. The CBN had offered N4.38bn on the 91-day tenor, N12.92bn on the 182-day tenor and N107.93bn on the 364 –day tenor.
The interest rate, otherwise known as stop rate, for the 91-day tenor dropped from its previous 9.499 per cent to 7.7998 per cent while that of the 182-day tenor dropped from 10.45 per cent to nine per cent. Similarly, the stop rate of the 364-day tenor dropped from 11.5 per cent to 10 per cent.
The CBN said in the auction result that the range of bid rates were between seven to 10.5 per cent for the 91-day tenor, eight to 13 per cent for the 182-day tenor and nine to 13.32 per cent for the 364-day tenor, while the successful bid rates for the respective tenors were seven to 7.7998 per cent; eight to nine per cent and nine to 10 per cent.
The 91-day tenor had a total subscription of N58.43bn while N57.85bn and N439.7bn were recorded as total subscription on the 182-day and 364-day tenors. The CBN said it only allotted the total amount offered on each tenor. The Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, said following the crash of interest rates of treasury bills, investors’ search for alternative investments would intensify.
He said the money market returns would also reflect the current rates in the medium term. According to him, new inflows and matured investments will be invested at current rates in the money market fund, which will drag the performance of the fund. A Financial and Risk Management Consultant, Mr Dayo Akinola, said the downward direction of the FGN T-biils stop rates was not unexpected.
He said there would likely be a preservation of value mounting pressure on the Naira due to scramble for Dollar, which would precipitate further devaluation as capital flight intensified. Akinola said, “Though the level of capital flight is not much at the moment, I see investors holding their maturing bills in euro currencies such as Dollar outside the banking system. “However, no monetary policy directive lasts forever. This policy regime will soon pass away.”
The CBN had recently given a directive to banks and other financial institutions to stop the sale of treasury bills to individuals and small firms with effect from November 29. Some bank officials had told The PUNCH that only big corporate organisations would be allowed to do treasury bills investments.
The sources, however, said the existing treasury bills investments would be allowed to continue till the end of their maturity dates. An operator said the inaccessibility of treasury bills might lead to an increase in savings deposits of the banks, attracting interest rates below what the treasury bills offered. A source from the CBN stated that the move was to stop the mop-up of funds from the system through the treasury bills.
Investors, however, raised concerns about the barring of individuals from investing in treasury bills, saying regulators were indirectly reducing the asset classes available for investment to investors. An individual, simply identified as Yinka, said in a tweet on Wednesday that the crash of interest rates of T-bills and the restrictive directives from the CBN on T-bills investment, added to the bearish sentiment in the equities market, would only result in an increase in ponzi schemes and other “good investment classes”.