Nigerian T-Bill Demand Surges to N6.30tn
Investors flooded the Nigerian short-term debt market with N6.30tn in subscriptions, driving yields down while long-term bonds faced selling pressure.
Nigerian investors subscribed N6.30tn at the Central Bank of Nigeria’s Open Market Operations auction last week. This figure represents a 6.3 times oversubscription against an initial offer of N1tn. The Debt Management Office’s separate treasury bill auction attracted an additional N2.64tn in bids. This surge in demand pushed short-term yields lower across the board. The average benchmark T-bill yield fell by seven basis points to 18.77 per cent.
The 364-day T-bill stop rate declined by 22 basis points to 16.62 per cent. This drop occurred despite the DMO allotting N1.05tn at the auction. GN auto markets/bonds: bond auction data confirms strong investor appetite for these instruments. The heavy buying volume indicates a preference for safety and liquidity over longer-term yields. This behavior contrasts sharply with activity in the longer-dated bond market.
Long-term bonds face selling pressure
Selling pressure intensified in the mid- to long-end of the FGN bond yield curve. The 2035 and 2037 maturities repriced from approximately 16.60 per cent to 16.90 per cent. The 2038 maturity traded near 17 per cent by the end of the week. Commercio Partners attributes part of this weakness to short-selling activity. Investors are demanding higher yields for taking on additional duration risk.
Despite late-week pressure on specific long-term issues, the average benchmark FGN bond yield decreased by 21 basis points. It closed the week at 16.28 per cent. This divergence highlights a selective approach to duration risk. Market participants are favoring shorter-dated instruments. They are remaining cautious towards longer-term government debt exposures.
Liquidity declines while naira weakens
Banking system liquidity fell from N4.27tn at the start of the week to N2.47tn at the close. This represents a significant contraction in available funds within the financial system. The Nigerian Overnight Financing Rate remained stable at 22 per cent. The overnight rate rose marginally to 22.15 per cent. Tighter liquidity conditions are influencing investor positioning and risk appetite.
The naira weakened by 0.40 per cent week-on-week. It traded at N1,326.51 per dollar on the Nigerian Foreign Exchange Market. Upcoming inflation data will likely influence future interest rate expectations. The forthcoming FGN bond auction will provide a fresh indication of demand for longer-dated securities. Investors are expected to remain cautious ahead of this event.
