OMO Bill Yield Slumps, CBN Ignores Investors Bids Last Minute
The average yield on Nigerian open market operation (OMO) bills declined by seven basis points to 21.7% due to increase demand in the secondary market last week.
The yield contraction at the OMO segment was driven by investors move to fill lost bids at the primary market auction conducted by the Central Bank of Nigeria in the secondary market.
The increased demand jump started OMO bills prices in the secondary market, causing yields curve to decline. On the other hands. Investors offloaded their interest in Nigerian Treasury bills.
The Treasury bills space witnessed on short-dated instrument, 34-day to maturity treasury bills which caused its yield to spike by +129bps and a few long-dated bills also faced sell pressures.
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 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 paper, the CBN did not make any sale. Investors Trim T-Bills Holdings, Yield Rises Ahead of Auction
