The Debt Management Office (DMO) raised N622.74bn through Treasury Bills (T-bills) auctions in September 2024, marking a 22.80 per cent increase compared to the N507.13bn sold in August 2024.
This data was highlighted in the FMDQ Markets Monthly Report for September, obtained by NewsNGR.
The surge in T-bill sales reflects the current high-interest rate environment, as the Central Bank of Nigeria (CBN) continues its monetary tightening to combat inflation.
The CBN’s recent decision to raise the Monetary Policy Rate (MPR) by 50 basis points to 27.25 per cent has had significant implications for fixed-income securities, particularly T-bills and other government debt instruments.
With higher interest rates, these securities have become more attractive to investors seeking higher returns.
The elevated MPR has led to increased yields on T-bills, drawing substantial demand from both institutional and retail investors.
This dynamic has been further supported by the inflationary pressures in the economy, pushing the CBN to maintain its hawkish stance.
Additionally, the DMO sold N264.53bn worth of Federal Government Bonds (FGN Bonds) in the same month, representing a 29.41 per cent decline from August’s N374.75bn.
Despite the decrease in bond sales, investor appetite for government securities remained robust, with both T-bills and FGN Bonds seeing oversubscriptions of 220.66 per cent and 176.59 per cent, respectively.
This oversubscription highlights the growing demand for sovereign securities as investors seek safer, higher-yielding options amidst rising interest rates.
In the Open Market Operations (OMO) segment, the CBN sold N714.50bn in OMO Bills in September, a 56.10 per cent drop from the N1.63trn sold in August.
This reduction in OMO activity may be linked to the CBN’s strategic liquidity management efforts, as it balances tightening measures with market stability.
Commercial Paper (CP) activity on the FMDQ Exchange also saw a decline. The total value of CPs quoted in September was N38.52bn, representing a 42.45 per cent decrease from August’s N66.93bn.
The outstanding value of CPs fell slightly by 2.06 per cent to N622.78bn due to the maturity of N51.59bn worth of CPs during the period.
The report also noted that the secondary market turnover on the FMDQ Exchange reached N35.99trn in September, a 10.96 per cent decrease from the previous month.
Despite this monthly drop, year-on-year activity saw a significant 54.63 per cent increase, driven largely by transactions in the Foreign Exchange (FX) and Money Markets (MM), which together accounted for 74.63 per cent of total market turnover.
The high-interest-rate regime, driven by the CBN’s inflation-focused policies, continues to impact the fixed income market positively, with higher yields attracting strong investor participation in government securities like T-bills and FGN Bonds.
However, the broader liquidity and investment landscape, particularly in non-sovereign debt and commercial papers, appears to be more subdued due to the higher cost of borrowing and tighter financial conditions.