The average yield on Nigerian Treasury bills has dropped below 22% in the secondary market as investors prepare for the upcoming N700 billion auction. Trading in the Treasury bills market has remained relatively quiet, with slight bullish activity as market participants analyze the latest inflation data.
Yields on Treasury bills fell slightly, particularly on longer-term securities, due to increased demand for naira-based investments. According to financial analysts, this decline was influenced by the recent release of rebased consumer price index (CPI) figures for January 2025, which showed a notable reduction in inflation. The headline inflation rate dropped significantly from 34.80% in December 2024 to 24.48% in January 2025.
As a result, interest rates on government securities declined across various tenors, with long-term securities experiencing the most significant drop. The average benchmark yield decreased by 9 basis points (bps) to close at 21.93% ahead of the midweek primary market auction.
Breaking it down further:
- Short-term bills (less than 3 months) saw a slight yield decline of 1 bp.
- Mid-term bills (around 6 months) also experienced a 1 bp drop.
- Long-term bills (almost a year) recorded a significant drop of 12 bps.
Analysts at Cordros Capital Limited attributed this decline to strong investor demand for specific Treasury bills, including those maturing in 79 days (-1 bp), 170 days (-1 bp), and 289 days (-90 bps). Additionally, increased buying activity was noted in the Open Market Operations (OMO) Bills segment, where a recent N10 billion OMO repayment led to a 49 bps reduction in yields, bringing them down to 25.9% in the secondary market.
The Debt Management Office (DMO), on behalf of the Central Bank of Nigeria, is set to issue N700 billion worth of Treasury Bills across three tenors—91 days, 182 days, and 364 days. As a result, analysts expect trading in the secondary market to remain subdued as investors prepare their bids for the upcoming auction.
