SAT AUG 08 2026-theGBJournal| Nigeria’s fixed-income market extended its bullish run in the first week of August, with abundant banking-system liquidity and strong domestic demand pushing Treasury and FGN bond yields lower, even as investors rotated away from Open Market Operations securities ahead of central-bank auctions.
The overnight (OVN) funding rate declined 4 basis points week-on-week to 22.1%, as ₦2.45 trillion in OMO maturities and substantial placements under the Central Bank of Nigeria’s Standing Deposit Facility (SDF) more than offset ₦4.70 trillion in debits from OMO primary market auctions.
Despite the sizeable sterilisation of liquidity through OMO sales, the banking system remained comfortably liquid, with average system liquidity ending the week at a net long position of ₦3.53 trillion, broadly unchanged from ₦3.54 trillion a week earlier.
The liquidity backdrop supported demand for government securities, particularly Treasury bills.
The average yield across the Treasury-bill curve fell 9bps to 19.1%, signalling renewed investor appetite for short-dated government paper.
Within the Treasury-bill market, NTB secondary-market yields declined 11bps to 18.1%, as surplus liquidity and sustained domestic demand encouraged investors to add exposure despite relatively lower returns.
The rally was less uniform in the OMO segment. Average OMO secondary-market yields rose 9bps to 21.4%, reflecting portfolio repositioning as investors sold existing holdings to raise cash for participation in the CBN’s primary-market auctions, where yields remained comparatively attractive.
At Monday’s OMO auction, the CBN offered ₦600 billion across tenors, attracting total subscriptions of ₦2.97 trillion.
The central bank allotted ₦2.52 trillion, with the stop rate settling at 20.10% for the 141-day instrument; no allotment was made for the 131-day tenor.
Demand remained strong at Tuesday’s auction. Against another ₦600 billion offer, subscriptions reached ₦2.20 trillion, prompting the CBN to allot ₦2.17 trillion.
Stop rates settled at 20.35% for the 112-day tenor and 20.15% for the 133-day tenor.
The auction outcomes underscore the strength of investor demand for high-yielding short-term instruments, while the large oversubscription levels also point to significant cash seeking deployment in the domestic fixed-income market.
The FGN bond market also strengthened, with the average secondary-market yield falling 24bps to 16.8%, as robust domestic demand extended the rally across the sovereign curve.
The move was broad-based, with average yields declining across the short-, medium- and long-term segments by 52bps, 21bps and 13bps, respectively.
Demand was particularly strong for the March 2027 bond, whose yield fell 126bps, while the April 2029 and March 2050 benchmarks declined by 44bps and 50bps, respectively.
The divergence between Treasury bills, OMO securities and FGN bonds suggests that investors are actively reallocating portfolios in response to liquidity conditions and relative value.
While OMO auctions are absorbing substantial excess cash, the persistence of a ₦3.53 trillion system liquidity surplus indicates that monetary tightening through open-market operations has yet to eliminate the underlying demand for government securities.
For the broader market, the combination of elevated liquidity, strong auction demand and falling FGN bond yields points to continued appetite for Nigerian fixed-income assets, although the direction of yields will remain sensitive to the CBN’s pace of liquidity sterilisation and the size and pricing of subsequent OMO and Treasury-bill auctions.
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