Treasury Bills and Bond Auctions: Key Updates from Nigeria and the UK
Financial markets in Nigeria and the United Kingdom are experiencing notable developments, from treasury bill auctions to evolving monetary policies influenced by inflation. Below, we dive into the details of these events, their implications, and what lies ahead.
The Central Bank of Nigeria (CBN) is preparing to auction treasury bills worth ₦610.08 billion. This issuance is divided into three tenors: 91-day bills valued at ₦41.89 billion, 182-day bills worth ₦28.45 billion, and 364-day bills totaling ₦487.23 billion.
This auction comes after the CBN’s previous treasury bill sale, where ₦626.33 billion was issued, surpassing the ₦513.43 billion in maturing bills that were rolled over. Despite a strong overall performance, shorter-tenor bills witnessed limited interest: only ₦13.99 billion of the ₦20.74 billion 91-day bill and ₦3.40 billion of the ₦5.43 billion 182-day bill were sold.
Yields on these shorter-term bills also saw an uptick for the first time in three auctions, with the 91-day bill yielding 18.86% and the 182-day bill rising to 20.39%. The one-year (364-day) bill, however, stood out, with yields surging to a record high of 29.87%, up from 26.02% in the previous auction.
For the fourth quarter of 2024, the CBN plans to issue ₦2.20 trillion in treasury bills, equivalent to the amount maturing between September and November 2024. This issuance is 41.03% higher than the ₦1.56 trillion issued in Q3 2024.
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The Debt Management Office (DMO) is set to auction three tranches of Federal Government of Nigeria (FGN) bonds worth ₦120 billion. This includes: A five-year bond reopening valued at ₦60 billion, and A seven-year bond reopening also worth ₦60 billion.
Notably, this offering is the smallest in 2024, significantly lower than the ₦300 billion issued in the previous month. In October, DMO exceeded expectations by selling more than twice its offer on the longest-tenured bond.
At the August auction, ₦289.60 billion was raised across two bonds, with the marginal rate for the longest tenure standing at 21.74%. Analysts suggest the reduced offering size reflects a potential scaling back of government borrowing as the DMO signals a target of issuing ₦80–₦100 billion per auction in Q4 2024.
Meanwhile, Nigeria’s total debt stock continues to rise, climbing to ₦121.67 trillion in the first half (H1) of 2024, compared to ₦97.34 trillion at the end of 2023.
Across the globe, the United Kingdom is grappling with a slowdown in inflation. The consumer price index (CPI) for September dropped unexpectedly to 1.7%, its lowest rate in three-and-a-half years. This figure is comfortably below the Bank of England’s (BoE) 2% inflation target, prompting discussions of further interest rate cuts.
Key factors driving this decline include falling airfares and reduced petrol prices. In response, the BoE cut its benchmark interest rate by 25 basis points, lowering it from 5% to 4.75% during its November monetary policy meeting.
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Andrew Bailey, Governor of the Bank of England, acknowledged the likelihood of gradual rate cuts but stressed caution, emphasizing that rates could not be reduced “too quickly or by too much.”
This inflationary dip and subsequent policy adjustments come as the UK Office for National Statistics prepares to release the CPI data for October, which will provide further insight into the economic trajectory.
These developments in Nigeria and the UK highlight diverging financial landscapes: In Nigeria, rising yields, particularly on longer-tenor treasury bills, indicate growing investor demand and potentially higher borrowing costs for the government. The UK’s lower inflation offers room for easing monetary policy, supporting economic recovery but signaling lower yields for fixed-income investors.
For global and local investors, these events emphasize the importance of monitoring macroeconomic indicators and policy shifts to make informed decisions in both markets.