The Central Bank of Nigeria (CBN) is set to open a substantial N700 billion Nigerian Treasury bills auction this Wednesday, comprising tenors of 91, 182, and 364 days. The auction follows the recent inflation data release, which analysts expect to show a decline below 18%, a development anticipated to soften yields on Treasury bills.
Fixed income market experts project strong investor demand, particularly for the 364-day papers, as market participants look to lock in longer-term investment returns amid a favorable macroeconomic outlook. Appetite for naira-denominated assets continues to build, contributing to robust subscription forecasts.
Trading activity in the fixed income market has recently reflected this optimism. Buoyed by a liquidity surplus, average yields across instruments contracted by 35 basis points week-on-week to 19.3%. Specifically, yields on Nigerian Treasury bills dropped 41 basis points to 17.0%, while Open Market Operation (OMO) bills saw a 51 basis point decline to 21.7%, signaling increased bargain hunting, according to a report from Cordros Capital Limited.
Heading into the new week, market sentiment remains mildly bullish as investors begin pricing in inflation moderation. Demand was notably strong along the mid-section of the yield curve, with particular interest seen in bills spanning the 150 to 175-day maturities.
Last week, the CBN auctioned mid-tenor OMO bills with the 152-day instrument clearing at a yield of 20.59%, with ₦640.15 billion allotted out of ₦645.15 billion in subscription. The 173-day bill cleared at 20.69%, with ₦1.91 trillion allotted against a ₦2.45 trillion subscription, underscoring sustained investor interest. Overall, total bids reached ₦3.09 trillion, significantly exceeding the ₦600 billion offered.
As the Treasury bills auction approaches, analysts and investors alike will be closely monitoring results for signs of whether Nigeria’s fixed income market can maintain its growth momentum in the face of evolving inflation dynamics.
