Nigeria’s one-year Treasury bills (T-bills) are showing lower returns as the Debt Management Office (DMO) takes steps to manage borrowing costs. In the most recent auction on Wednesday, the return on the one-year T-bill dropped to 29.51%, down from 29.75% in the previous auction. This is the second time in a row that the returns have gone down, after reaching a high of 30.70% three auctions ago.
The auction attracted a lot of interest from investors, especially for the one-year T-bill. Even though the DMO offered N256.51 billion for this bond, it ended up selling N527.83 billion because there was more demand than expected. This means the amount sold was more than double the original offer. Overall, the DMO sold N527.83 billion in total for all types of bonds, even though it only planned to sell N275.71 billion.
Experts at Meristem had predicted earlier that the returns on the 364-day bond would stay fairly steady, with a small chance of going down. This prediction is supported by the DMO’s plan to reduce the amount of bonds offered in auctions.
“This expectation is backed by the much smaller amount of bonds being issued,” analysts said, pointing out that these changes help the DMO control borrowing costs.
The drop in yields comes after the Monetary Policy Committee raised interest rates by 0.25% to 27.50% in November—the sixth increase this year—to fight inflation. Even with this increase, yields on T-bills haven’t gone up, because they were already at their highest before the latest rate change.
In recent Open Market Operations (OMO) auctions, only long-term instruments were popular. On December 6 and 9, there were no sales of short- and mid-term instruments. The long-term rate stayed at 23.98% during the auction on December 9.
