Investors shun mid-tenor instruments as CBN sells N1.9trn OMO bills

The Central Bank of Nigeria (CBN) sold N1.9 trillion worth of Open Market Operations (OMO) bills at its latest auction, as investors largely avoided mid-tenor instruments and focused demand on short- and long-dated maturities.

The auction recorded total subscriptions of N2.2 trillion, far above the N600 billion initially offered, highlighting strong liquidity in the financial system and sustained appetite for high-yield government securities.

A breakdown of subscriptions showed that the seven-day instrument attracted N884 billion, while the 140-day tenor recorded the highest demand at N1.25 trillion.

However, the 91-day paper witnessed significantly weaker demand, drawing only N87 billion in subscriptions, with just N21 billion eventually allotted.

Stop rates closed at 21.90 per cent for the seven-day bills, 19.87 per cent for the 91-day tenor, and 19.91 per cent for the 140-day paper, indicating a narrow spread between medium- and longer-term maturities.

Analysts said investor sentiment reflected caution over the future direction of interest rates.

Dealers described the 91-day instrument as unattractive because it offered lower returns than the seven-day bill, while providing little additional premium compared with the 140-day paper.

A fixed income trader at CardinalStone, Victor Ogundijo, said investors were naturally favouring longer maturities since yields on the 91-day and 140-day papers were nearly the same.

Market participants said the seven-day instrument remained attractive to investors seeking to roll over funds quickly at elevated rates without committing to longer tenors.

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At the same time, the strong demand for the 140-day paper suggested that some investors were positioning to secure yields ahead of possible rate stabilisation.

Despite offering only N600 billion, the CBN allotted N1.9 trillion, underscoring its continued reliance on OMO bills to absorb excess liquidity and tighten monetary conditions.

Analysts, however, said any liquidity squeeze from the large sale could be temporary, given expected inflows from maturing securities, coupon payments and Federation Account Allocation Committee (FAAC) disbursements.

They added that with stop rates remaining close to 20 per cent and demand still robust, investors are expected to remain active at future auctions, although participation may stay selective as they weigh yield opportunities against changing rate expectations.

Nigeria’s financial markets pipeline for the week of April 22, totals approximately N1.11trn across sovereign bills, corporate bonds, commercial paper, private placements, and insurance rights issues, underscoring the breadth of simultaneous capital formation activity in a single week. At N750bn, this week’s Treasury Bill auction is the largest weekly T-bill allotment in the current quarterly cycle. The 364-day tenor alone commands N550bn, 73% of the total offer, signalling a deliberate sovereign shift toward longer-duration borrowing.