By Boluwatife Oshadiya
Key Points
- Average Treasury bills yield rises by 13bps in the secondary market
- 364-day paper records sharpest increase, up 56bps to 19.1%
- Liquidity deficit widens to ₦3.8 trillion
- Auction demand remains strong, with ₦2.12 trillion subscription for 364-day bill
- Stop rates unchanged despite robust investor demand
Main Story
Yields on Nigerian Treasury bills climbed by 13 basis points in the secondary market, reflecting increased sell-side activity across the short, mid, and long segments of the curve as investors adjusted positions amid tightening liquidity conditions.
Market participants attributed the upward yield movement to pressure from sell orders and the impact of a tight spot rate environment, particularly in the short-term government securities space. Analysts tracking the fixed-income market noted that the most significant adjustment occurred at the long end, where the 364-day instrument surged by 56 basis points week-on-week to settle at 19.1%.
In contrast, shorter-tenor instruments posted marginal declines. Yields on the 182-day and 91-day Treasury bills compressed by 15 basis points and 2 basis points to 17.3% and 16.4%, respectively, suggesting selective demand for near-term maturities.
Liquidity conditions in the financial system remained strained, reinforcing the bearish tone in the secondary market. Data showed that system liquidity closed the week at a deficit of ₦3.8 trillion, widening from ₦3.4 trillion recorded in the previous week. Analysts linked the persistent liquidity squeeze to significant outflows through the Central Bank’s Standing Deposit Facility (SDF), which accounted for approximately ₦3.9 trillion.
Despite the tight liquidity backdrop, investor appetite at the primary market auction remained strong. Total subscriptions significantly exceeded the ₦750 billion offered by the Debt Management Office (DMO), underscoring sustained demand for government securities as investors continue to seek relatively risk-free returns in a high-yield environment.
The 364-day bill attracted the bulk of demand, with subscriptions reaching ₦2.12 trillion. Meanwhile, the 182-day and 91-day tenors recorded ₦172.08 billion and ₦72.73 billion, respectively.
Allotments were heavily skewed toward the long end, with ₦753.45 billion allocated to the 364-day instrument, compared to ₦76.24 billion for the 182-day bill and ₦64.48 billion for the 91-day paper. This allocation pattern reflects investors’ preference for locking in higher yields over longer durations amid inflationary pressures and monetary tightening expectations.
Interestingly, stop rates remained unchanged across all maturities at 15.95% (91-day), 16.19% (182-day), and 16.199% (364-day), indicating a level of pricing discipline by the authorities despite the strong subscription levels.
What’s Being Said
Market analysts maintain that the bearish trend in the secondary Treasury bills market is likely to persist in the near term, driven by ongoing liquidity constraints and cautious investor positioning.
They note that the divergence between strong primary market demand and rising secondary market yields highlights underlying structural liquidity pressures, as well as tactical portfolio rebalancing by institutional investors.
What’s Next
Analysts expect yields to remain elevated in the short term, particularly at the long end of the curve, as liquidity conditions stay tight and investors continue to demand higher compensation for duration risk. Market direction will also be influenced by Central Bank liquidity management actions and upcoming debt auctions.
