The average yield on Nigerian Treasury bills has surged to 24.1% due to selling pressure in the secondary market, following the Central Bank of Nigeria’s (CBN) adjustment of discount rates at a recent primary market auction.
Last week, the Debt Management Office (DMO) conducted a major auction for treasury bills on behalf of the CBN, which is responsible for liquidity management. The CBN offered N489.8 billion in Treasury bills, exceeding the weekly maturity amount by N115.1 billion, according to notes from various investment firms.
Investor demand was robust, as market participants sought options to allocate funds and maximize portfolio returns. The auction concluded with the DMO allotting the full amount on offer.
Afrinvest Limited noted that despite diverse yield expectations, demand was especially strong for short- and mid-term instruments, with bid-to-offer ratios clearing at 1.3x and 1.0x, respectively.
For the 91-day bills, the CBN offered N13.1 billion, receiving bids worth N16.9 billion before allotting N13.1 billion at a yield of 17%. On the 182-day bills, N12 billion was offered, attracting bids of N12.6 billion, and the CBN allotted N9.4 billion at a yield of 17.5%.
For 364-day bills, the CBN offered N349.5 billion, receiving bids totaling N460.4 billion. It ultimately allotted N352.2 billion at a yield of 20.65%, marking a 79 basis points increase.
In the secondary Treasury bills market, trading was bearish, with average yields across tenors rising 76 basis points over the week to reach 24.1%. Long-term instruments saw the most significant sell-offs, while mid- and short-term segments increased by 12 and 10 basis points, respectively, pushing yields to 26.6% and 22.0%.
Analysts predict continued bearish sentiment in the secondary market, driven by anticipated short-term repricing due to a weak inflation and interest rate outlook.
Meanwhile, in the Open Market Operations (OMO) bills segment, the average yield climbed by 18 basis points to 26.1%, according to Cordros Capital Limited.
