Yields on Naira Assets Mixed, Banks Trim T-Bills Holdings
The yields on naira assets closed on a mixed note, with banks selling interest in Treasury bills to support daily liquidity positions amidst tightening funding levels in the financial system.
The average yield on OMO bills was squeezed in the secondary market as foreign portfolio investors and local deposit money banks continue to search for positions. However, trading activities in the Treasury bills segment was negative as banks trimmed positions as liquidity to meet funding requirements.
The portfolio reshuffle set the yields on the naira assets in different directions: OMO bill yields are squeezed, but Treasury bill yields climbed.
The OMO bills yield fell, albeit moderately, after the Central Bank of Nigeria (CBN) allotted N2.12 trillion worth of OMO bills to eligible investors—local and foreign—at the primary market auction.
The market opened the week on a bearish note following uncertainty witnessed at the primary market the previous week. The CBN held OMO auction with an offer size of ₦600 billion but eventually sold ₦2.12 trillion at 23.70% and kept the yield at 28%.
The last bargain hunting plunged the yield on Nigerian OMO bills downward six basis points to 24.5% in the OMO segment. To keep foreign investors in the market, the CBN is expected to maintain tight monetary policy despite disinflation. In the other segment in debt market, yields have fallen below 20%, except for OMO bills.
This cast doubt on the possibility of monetary easing; a potential interest rate cut would force down yields on naira assets and trigger capital reversal. The Nigerian Treasury bills secondary market closed bearish on Tuesday as declining system liquidity pushed yields higher across the curve.
The yield on Nigerian Treasury bills maturing on 06 Nov 2025 rose 6 bps to 16.79%, while the 06 Aug 2026 eased marginally by 1 bp to 19.49%. Trading activity is expected to align with the available liquidity.
Across the curve, the average yield contracted at the short (-1 bp) end, driven by demand for the 86-day to maturity (-1 bp) bill, but expanded at the mid (+7 bps) segment, driven by the selloff of the 163-day to maturity (+80 bps) bill. The average yield remained unchanged at the long end. CBN Increases Rate on 364-Day Nigerian Treasury Bills
