DMO plans N700bn T-bill sale as CBN lures investors with higher returns
The Debt Management Office (DMO) will offer N700 billion in Nigerian Treasury bills (NTBs) at its primary market auction on Wednesday, September 2, amid sustained banking-system liquidity and a widening investor focus on the comparatively higher returns offered by Open Market Operation (OMO) bills.
The auction will cover the standard 91-day, 182-day and 364-day tenors. It follows a week in which the Treasury bills secondary market traded on a bearish note, as investors sold down NTB holdings to create room for primary-market participation and repositioned portfolios in response to the Central Bank of Nigeria (CBN)’s sizeable OMO issuance.
Average yield across Treasury bills instruments increased by 10 basis points week-on-week to 19.3 per cent. The movement was driven principally by the NTB segment, where average secondary-market yields expanded by 35 basis points to 18.9 per cent.
Market participants attributed the increase to investors unwinding existing positions ahead of last Wednesday’s NTB primary market auction, a strategy that typically provides liquidity for fresh subscriptions and enables buyers to adjust duration exposure. Despite this selling pressure, demand for government securities remained firm, highlighting the depth of local institutional liquidity seeking low-risk investment outlets.
At the auction, the DMO offered N700 billion across the three tenors and received total subscriptions worth N3.79 trillion. This represented demand of more than five times the amount on offer. The DMO allotted N762.89 billion, exceeding its initial offer by N62.89 billion.
The stop rate on the 364-day bill declined by 44 basis points to 17.15 per cent, reflecting strong demand for the long-dated paper despite the generally higher yield environment. Stop rates on the 91-day and 182-day instruments were unchanged at 16.30 per cent and16.50 per cent, respectively.
However, investor interest in NTBs is being tested by the relative value available in OMO bills. The CBN conducted two OMO primary market auctions during the week, offering a combined N1.10 ] trillion and allotting N4.73 trillion, following subscriptions totalling N8.62 trillion.
At the first auction on Wednesday, the CBN offered N600 billion in 97-day and 132-day bills. Demand reached N4.26 trillion, while allotments stood at N2.80 trillion. Stop rates settled at 19.90 per cent for the 97-day bill and19.65 per cent for the 132-day instrument.
The apex bank returned to the market on Thursday with a further N500 billion offer across 96-day and 152-day maturities. Bids rose to N4.36 trillion, with the CBN selling N1.93 trillion. Stop rates closed at 19.85 per cent for the 96-day bill and 19.32 per cent for the 152-day paper.
The substantial allotments, alongside rates above 19 per cent, lifted demand in the OMO secondary market. Average OMO yields fell by 44 basis points to 20.4 per cent as investors whose bids were not fully accommodated at the auctions sought available instruments in the secondary market.
Analysts expect the Treasury bills market to trade with a bullish bias in the coming week, supported by resilient domestic demand and ample system liquidity.
Still, yield movements in the NTB market may remain uneven, as investors compare returns on NTBs with the more attractive OMO rates. The outcome of the September 2 auction will indicate whether strong liquidity can keep NTB borrowing costs contained despite competition from CBN liquidity-management securities.
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