When a sizable portion of the proceeds from a primary market auction held by the Central Bank of Nigeria (CBN) last week were received, the average yield on open market operations (OMO) bills suddenly dropped below 18%.
Large ticket OMO sales of N1 trillion were introduced by the apex bank to draw in international portfolio investors. With a N1.06 trillion allocation made to market players, the auction saw a high level of participation.
Analysts noted in their notes that despite the debits for the N1.06 trillion OMO auction held on Friday, the overnight lending rate fell by 70 basis points to 27.5%.
Following the benchmark interest rate hike at the CBN meeting last week, investors in the secondary trades level of the Treasury Bills market raised their holdings.
Buying interest registered in the second market on Monday dragged the average yield lower by 3 basis points to 17.21% from 17.24% previously reported by MarketForces Africa.
In its market note, Cordros Capital Limited told investors via email that across the curve, the average yield declined at the short end by a basis point (1 bp), the midpoint dropped by two basis points (2 bps), and the long end declined by three basis points (-3 bps).
The decline was driven by investors’ interest in the 80-day to maturity, whose yield dropped by -2 bps; the yield on the 171-day to maturity fell by -3 bps; and the 339-day to maturity nosedived by 4 bps.
Similarly, the average yield contracted by 3 basis points to 17.9% in the OMO segment. Also, trading activities in the FGN bond secondary market were relatively quiet.
Traders said the average yield remained at 17.1%. Across the curve, the average yield inched higher at the short (+1bp) end, following profit-taking activities on the MAR-2025 (+3bps) bond, but was unchanged at the mid and long segments.
FMDQ data revealed that market rates dropped sharply despite a large OMO auction on Friday. The open repo rate (OPR) and overnight lending rate (OVN) dropped to 26.88% and 27.49%, respectively.
