Yields on Nigerian Treasury bills slid last week in the secondary market after the Central Bank of Nigeria (CBN) declined to allot more than the offered amount at its latest auction, despite a surplus of investor interest totaling ₦1.071 trillion.
The move triggered heightened trading activity among investors who missed out at the primary market, pushing up demand and sending yields downward. Cordros Capital stated that the average yield fell by 13 basis points to 20.5% as unmet bids flooded the secondary market.
At the auction, the CBN offered a total of ₦162.02 billion: ₦22.02 billion in 91-day paper, ₦40 billion in 182-day bills, and ₦100 billion in one-year bills. Subscriptions totaled ₦1.23 trillion, slightly down from the previous ₦1.31 trillion.
Despite the high interest, the CBN stuck to its offer, allotting ₦37.98 billion for the 91-day maturity, ₦40.54 billion for the 182-day, and ₦83.5 billion for the 364-day bills. This translated to a bid-to-offer ratio of 7.6x—significantly higher than the 2.9x ratio in the prior auction.
As a result, stop rates adjusted downward. The 91-day bill settled at 17.80% (down 18 bps), the 182-day at 18.35% (down 15 bps), and the 364-day bill dropped to 18.84% from 19.35%.
Simultaneously, the CBN conducted an OMO auction offering ₦600 billion split evenly between 155-day and 204-day instruments. Demand surged to ₦1.15 trillion, prompting the CBN to allot ₦1.07 trillion. Stop rates were set at 24.20% for 155-day and 24.59% for 204-day OMO bills.
However, the secondary market responded with a 75 basis points increase in average OMO yields to 26.7%, as investors offloaded positions to realign with the primary auction.
With continued investor interest in short-term government securities and the CBN’s strategic allotments, analysts predict more pricing adjustments in the coming sessions, especially as maturing instruments pump liquidity back into the system.
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