The Debt Management Office (DMO) maintained Treasury bill stop rates at its auction on Wednesday, November 4, despite strong investor demand and rising secondary-market yields, as the Central Bank of Nigeria (CBN) intensified liquidity management through aggressive Open Market Operations (OMO), mopping up N2.95 trillion.
The DMO raised N509.40 billion from the auction, more than seven times the N71.16 billion allotted at the previous exercise, following subscriptions of N2.04 trillion against an offer of N800 billion. The strong demand translated into a bid-to-cover ratio of 2.56x, up from 2.38x previously, highlighting sustained investor appetite for government securities.
However, the DMO maintained stop rates at 15.40 percent, 15.79 percent and 15.80 percent for the 91-day, 182-day and 364-day instruments, respectively, despite the increase in secondary-market yields. The decision suggests that the debt manager remains cautious about raising domestic borrowing costs, even as market pricing reflects tighter liquidity conditions and higher yield expectations.
The auction outcome followed the CBN’s OMO auction on Tuesday, November 3, where the apex bank allotted N2.95 trillion across the 119-day, 126-day and 133-day tenors, almost twice its N1.50 trillion offer. The auction attracted subscriptions of N3.52 trillion, representing a bid-to-cover ratio of 2.35x, as investors showed strong appetite for the short-term instruments.
Demand was heavily concentrated on the 133-day tenor, which attracted N2.36 trillion, accounting for approximately 80 percent of total subscriptions. OMO stop rates also edged higher to 17.77 percent, 17.71 percent and 17.67 percent across the three tenors, respectively, reinforcing the higher yield environment in the short-term money market.
The CBN’s aggressive liquidity absorption came against the backdrop of marginally higher banking system liquidity, which rose to N7.58 trillion from N7.37 trillion at the close of the previous week. OMO maturities of N2.02 trillion were largely offset by the N2.95 trillion allotment at Tuesday’s auction, limiting the liquidity injection into the financial system.
Meanwhile, secondary-market Treasury bill yields increased ahead of the DMO auction, with the average yield rising by 43 basis points to 17.70 percent on November 3 from 17.28 percent on October 28. The increase was largely driven by the 3-month and 6-month benchmarks, which climbed by 130 basis points and 122 basis points to 17.40 percent and 17.85 percent, respectively.
The 12-month benchmark yield edged up by 3 basis points to 18.24 percent, while the 9-month yield declined by 36 basis points to 18.10 percent. The 1-month yield also eased marginally by 5 basis points to 16.93 percent.
The upward movement in shorter-dated secondary-market yields reflects the influence of higher OMO rates, as the CBN continues to offer returns of approximately 17.6 percent to 17.8 percent on its short-term instruments. These rates remain significantly above the DMO’s Treasury bill stop rates, creating a yield differential between the two government securities.
Demand remains concentrated on one-year bills
A breakdown of Wednesday’s auction showed that investor demand remained heavily skewed towards the 364-day Treasury bill, which attracted subscriptions of N1.99 trillion against an offer of N600 billion, translating into a bid-to-cover ratio of 3.32x, compared with 3.06x at the previous auction.
The DMO allotted N461.84 billion on the tenor, representing approximately 77 percent of the amount offered, while rejecting about N1.53 trillion in bids, with offers reaching as high as 18.18 percent.
In contrast, demand for shorter-dated instruments remained subdued. The 91-day bill attracted subscriptions of N25.01 billion against N100 billion offered, resulting in a bid-to-cover ratio of 0.25x, while the 182-day instrument recorded N25.83 billion in subscriptions, translating into a bid-to-cover ratio of 0.26x.
The DMO allotted N22.40 billion and N25.17 billion on the 91-day and 182-day bills, respectively, accepting approximately 90 percent and 97 percentof bids at the two tenors.
The concentration of demand on the 364-day instrument, which accounted for approximately 97.5 percent of total subscriptions, underscores investors’ preference for longer-dated Treasury bills amid the prevailing yield environment.
Overall, the contrasting outcomes of the OMO and Treasury bills auctions highlight the evolving dynamics of Nigeria’s fixed-income market. While the CBN continues to absorb liquidity through relatively high-yielding OMO instruments, the DMO is maintaining its Treasury bill pricing despite rising secondary-market yields and strong investor demand, leaving the market to adjust through secondary-market repricing.
Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.
