Nigerian Treasury Bills See Yield Drop as Demand Surges in Secondary Market
Yields on Nigerian Treasury bills declined by 19 basis points in the secondary market on Thursday, following a significant shift in investor behavior after the Central Bank of Nigeria (CBN) declined to accept several bids at its recent auction.
During Wednesday’s auction, the CBN floated ₦400 billion worth of Treasury bills. However, investor appetite far outpaced supply, with total subscriptions reaching ₦1.54 trillion—an indication of heightened demand for local currency assets.
In the end, the apex bank allotted ₦714.38 billion, with stop rates falling across the board. The 91-day bill dropped by 50 basis points to 18.00%, the 182-day bill declined by 100 basis points to 18.50%, and the 364-day paper slipped by 3 basis points to 19.60%, according to a market note from AIICO Capital Limited.
A sizeable portion of unmet bids—approximately ₦826 billion—spilled into the secondary market, intensifying demand and causing asset prices to rise, which in turn drove yields lower.
Market participants reported selective interest at the long end of the yield curve, with buying activity in longer-dated instruments pulling yields down by 41 basis points. This contributed to a broader decline in the average yield to 20.82%.
Some investors who secured allocations at the auction opted to book profits, leading to marginal increases in yields. Notably, bills maturing on October 9, November 6, and January 8 attracted increased attention.
Although some investors sought to liquidate their positions to lock in gains, demand remained relatively subdued due to the prior oversubscription. The newly issued one-year note, maturing on April 23, 2026, emerged as the most actively traded instrument during the session.
Despite the disparity between supply and demand, overall transaction volumes improved compared to earlier sessions. Analysts suggest that while investor sentiment remains cautious, interest in longer-tenor securities could strengthen going forward.
Dissecting the yield curve, the short end saw a marginal increase in average yield by 2 basis points, driven primarily by a 16 basis point sell-off in the 91-day maturity. In contrast, mid-tenor yields declined by 9 basis points, while long-dated securities saw a sharper contraction of 33 basis points.
The yield compression was largely influenced by demand for instruments with 168 and 196 days to maturity, which saw yield declines of 49 and 176 basis points, respectively. Meanwhile, the Open Market Operations (OMO) segment recorded a 95 basis point decline in average yield, settling at 27.2%.
Overall, the average yield on Nigerian Treasury bills settled at 20.82% on Thursday, marking a 19 basis point reduction from the previous session.
