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Interest rates for recent CBN Treasury Bills was low
The rates for the treasury bills which the FG issues through the Central Bank of Nigeria, CBN, to facilitate budget deficit fell by 0.05%.
The T-bills displays the most liquidity in all money market securities and auctions at less than face value with investors redeeming for face value at maturity. The market quotation from the CBN for the recently auctioned 91-day treasury bill shows a sale made at a 0.34% interest rate.
Aside from the 91-day, T-bills of different tranches have also fallen – 182-day at 0.5 and 365-day bills at 0.98%. That notwithstanding, there was an oversubscription of the treasury bills as investors scramble for high paying investments.
The 365-day bill segment was oversubscribed by over N599 billion. It was a N93.9bn offering which recorded a total subscription of N694.9 billion. A subscription of N84.8 billion went for the 91-day bill as against N49.8 billion.
The weighted average rate of interest is 0.05% compared to 1% for the previous auction two weeks ago. Switching the monetary policy rate from 12.5% to 11.5% to force stability from within, and avoid its dependence on foreign investors has greatly impacted the treasury bills rate.
The National Bureau of Statistics, NBS, suggests that Nigeria is now closer to a recession. Its data for the next weeks will tell.
NSE – Investment rules during the 2020 recession in Nigeria
Oversubscription of treasury bills is an investment rule which investors deploy to ensure that they are safe during a recession. It could rather place them in a better financial situation in the long term.
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