Due to increased demand in the secondary market last week, the average yield on Nigerian open market operation (OMO) bills decreased by seven basis points to 21.7%.
Investors’ efforts to make up for lost bids at the Central Bank of Nigeria’s primary market auction in the secondary market were the main cause of the yield decrease in the OMO segment.
The secondary market’s OMO bill prices were jumped by the increased demand, which led to a drop in the yield curve. Conversely, though. Investors sold off their holdings of Treasury bills issued in Nigeria.
The Treasury bills market saw pressure to sell some long-dated bills as well as short-dated instruments such as 34-day to maturity Treasury notes, which resulted in a yield jump of +129bps.
Last week, the apex bank conducted two OMO bills auction with N500 billion standard maturities each. For the first OMO auction, fixed income traders at Cordros Capital Limited reported that the CBN offered instruments worth N500.00 billion. The offer was split into N75.00 billion for 90-day, N75.00 billion for 174-day, and N350.00 billion for 363-day OMO bills.
Traders said investors remained averse to the 90-day bill and largely focused on the 1-year bill which attracted 99.9% of the total subscription made by investors at the primary market auction. Analysts said in their respective market updates that aggregate subscription at the auction was N986.88 billion, translating to bid-to-offer ratio of 2.0x.
The CBN filled all available bids worth N1.00 billion for the 174-day OMO Bills and N985.88 billion for the 363-day OMO instruments.
Auction results showed that spot rates for 174 day OMO bills dipped to 19.48% from 19.64% in the previous auction. Also, spot rate on 373-day OMO bills declined to 22.30% from 22.34% in the previous auction.
At the second auction, which was held on Friday, the CBN offered OMO bills worth ₦500.00 billion. Despite subscriptions of about ₦5.00 billion each for the short-term and medium-term papers and ₦311.50 billion for the long-term papers, the CBN did not make any sales.
