Investors Flock to High-Yielding Assets as Central Bank Mops Up Liquidity

Nigerian Treasury and Open Market Operation (OMO) bills surged in the secondary market, triggering a significant shift in the yield curve.

This rally unfolded as the Central Bank of Nigeria (CBN) launched fresh OMO auctions to mop up N600 billion through two mid-tenor offers.

Banks and foreign portfolio investors heavily subscribed to these OMO instruments, reflecting robust demand for Nigerian fixed-income securities.

Concurrently, the Debt Management Office (DMO) entered the market, aiming to raise N300 billion via two reopening bonds set to mature in 2029 and 2033.

Subscription for the bond auction remained lukewarm, leading the DMO to slash rates on Nigerian bonds and under-allocate the offer.

The effects of these auctions rippled into the fixed income markets, where investors aggressively pursued high-yielding assets amid ongoing disinflation.

Despite the dual auction efforts, trading in the treasury bills segment concluded on a bullish note, defying liquidity tightening measures.

Analysts highlighted strong investor interest in the July, August, and May Nigerian Treasury bills. The average yield on treasury bills tightened by 6 basis points, settling at 20.6%.

Yield contractions spanned the entire curve, with the short segment dropping 4 bps, the mid segment 3 bps, and the long segment 8 bps.

Demand for specific maturities fueled this compression, notably the 87-day bills (-13 bps), 178-day bills (-4 bps), and 346-day bills (-24 bps).

In the OMO segment, the average yield also declined sharply by 24 basis points to 26.2%, signaling widespread market strength.

The persistent rally in Nigerian Treasury and OMO bills, alongside shrinking yields, underscores investors’ unrelenting appetite for fixed-income opportunities.

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