Treasury Bills In Nigeria — Investment — Nairaland

Treasury Bills! Why It Is The Best Investment For Now.

This thread is dedicated for all issues related to Treasury Bills, their going rates, when Auctions are due and why they should be bought,

I am not a Finance person, am just a trader who was lucky to work in one financial insitution years back so I might not be the best person to answer questions on this as they come, But am sure we have a lot of financial gurus with CFAs in this Forum and all our questions would be answered,

LAGOS Feb 24 (Reuters) — Nigeria sold 149.65 billion naira ($953.00 million) worth of treasury bills this week with yields on the 182-day and 364-day papers lower than the previous auction, while the 91-day yields rose slightly.

The central bank sold 44.65 billion of the 91-day treasury bill at a 14.80 percent rate, up marginally from the 14.70 percent yield at the previous auction, it said in a statement.

It sold 20 billion naira worth of the 182-day bills at 15.50 percent, lower than the 16.09 percent previously, and 85 billion naira in the 364-day instrument at a marginal rate of 15.55 percent, compared with 16.89 percent at the last auction.

Traders attributed the falling yields on the longer dated treasury bills to the surge in demand from offshore investors.

Total subscription level rose to 476.86 billion naira, compared with 316.85 billion naira at the last auction, underscoring the increased interest in the local debt instrument by both offshore investors and local banks.

Nigeria, Africa’s second biggest economy after South Africa, issues treasury bills regularly as part of monetary control measures to help lenders manage their liquidity. ($1 = 157.03 naira) (Reporting by Oludare Mayowa; Editing by Tim Cocks)

The planned sale of Federal Government of Nigeria, FGN, bonds valued at N70 billion by the Debt Management Office, DMO, is expected to engender a slowdown in demand in the bond market this week, says analysts at Dunn Loren Merrifield.

The Analysts — Mr. Tola Odukoya and Mr. Jide Nwaogwugwu— in their weekly report, titled, Bond watch, made available to Vanguard, Monrday, however, predicted a bullish trend in the bond market going by the attractiveness of the yields.

They said the Federal Government through the DMO, will this week, offer at the primary auction, N35 billion each of 7.00 per cent October 2019 and 16.39 per cent January 2022 bonds which are trading at 16.03 per cent and 15.95 per cent respectively in the secondary market.

The analysts also cautioned the monetary authorities against increasing the benchmark interest rate — the Monetary Policy Rate — saying any attempt to increase the rate to address current inflationary realities will stifle the growth potentials of the bond market.

According to the, the release of the consumer inflation data shows a significant rise in the Consumer Price Index, CPI, to 12.60 per cent in January 2012, from 10.30 per cent in December 2011.

They blamed the increase in inflation rate to the partial removal of the petroleum subsidy, a development which triggered a spike in food and non-food items as a result of the increase in transportation costs.

“We are however of the opinion that, despite the increase in CPI, monetary authorities should hold benchmark rate at the current level – or possibly reverse the current policy stance – and seek to stimulate economic growth.

“We believe that further increase in the benchmark rate to address inflationary pressure will lead to a possible reversal of the growth of the domestic bond market and further stifle the flow of the long term funding to the real economy,” they said.

In their analysis for the bond market for the previous week, the analysts said the fixed income secondary market continued its bullish run from the previous week across all maturities with the greatest impact felt on the short term maturities and the 16.39 per cent FGN January 2022 bond.

The major driver, they said was the aggressive demand at the treasury bills primary auction, which drove down the discount rates of the 182 and 364 days bills to 15.50 per cent and 15.55 per cent from 16.0975 and 16.899 per cent respectively.

“However, there was a slight increase in the stop rate for the 91 day treasury bills from 14.70 per cent to 14.80 per cent.

“Expectedly, the 5.50 19 February 2013 FGN bond stopped trading as a result of the term to maturity dropping below one year whilst the 9.50 23 Feb 2012, worth N35.0 billion, matured,” they noted.