OMO, T-Bills Yields Fall Over Rising Demand for Naira Assets
Nigerian Treasury papers and OMO bills yields declined in the secondary market, reflecting an untamed investors’ appetite for naira assets amidst repricing.
To reflect the slight reduction in benchmark interest rates, the market anticipates spot rates on short-term instruments issued by the authority to adjust downward.
The real interest rate has increased to about 9% due to sustained moderation in headline inflation. Excess liquidity in the financial system also impacts subscription levels across Treasury and OMO bills auction in Q4.
With lower appetite for lending, high default and declining net margin, banks sought to park excess credit at the standing deposit facility of the Central Bank of Nigeria (CBN).
Commercial banks preference for 24.5% rate on fund placed in CBN standing deposit facility reflects weak credit appetite and cautious short-term positioning.
The latest open market operations conducted by the Apex Bank has reduced excess funding in the financial system, but banks are yet to experience pressures.
In the secondary market, bullish sentiment dominated the Treasury Bills space, with strong buying interest across short, mid, and long-dated maturities, separate investment firms reported.
Hence, the average yields 6bps lower to 17.39% week-on-week ahead of a Treasury bills auction worth N650 billion scheduled for Wednesday.
Meanwhile, the OMO market traded mixed, with mild selloffs at the mid-to-long end—particularly on the 9-Dec and 17-Feb maturities—pushing average OMO yields 105 bps higher to 21.62%.
Both OMO and Treasury bills opened the week quietly despite ample liquidity. Early-week activity was subdued, constrained by wide bid-ask spreads.
By midweek demand in mid- to long-term tenors slightly eased yields. Investors also rotated positions and booked profits in the course of the week. By Friday, focus shifted to the OMO auction, prompting mild sell pressure in long-dated papers.
The CBN auctioned N600.0 billion worth of OMO bills across two mid-tenor papers. The OMO auction saw strong demand, as total subscription, which amounted to N2.1 trillion, was exactly matched with the amount allotted, with stop rates at 19.40% and 19.89% for the 193-day and 249-day bills, respectively. BUA Foods, Cement Surpass N17trn in Market Value, 18% of NGX
