SAT JAN 24 2026-theGBJournal| Treasury yields rose on Friday to end week as investors weighed outcome of Wednesday’s NTB PMA offer and upcoming FGN bond offer circular.
Overall, the fixed income market capitalization fell 1.90% to N50.65 trillion.
As expected, the Treasury Bills secondary market remained bearish, as participants unwound positions amid expectations of higher stop rates at the NTB PMA.
Consequently, the average yield across all instruments increased by 8bps to 20.4%.
Across segments, average NTB yields increased by 37bps to 18.5%, while average OMO yields declined by 6bps to 22.4%.
At Wednesday’s NTB PMA, the Debt Management Office (DMO) offered N1.15 trillion in bills, with total subscriptions reaching N3.44 trillion (bid-to-offer: 3.0x).
Ultimately, the DMO allotted N1.06 trillion (bid to cover: 3.2x). Stop rates increased on the 91 Day bill (+4bps to 15.84%) and 182 Day bill (+15bps to 16.65%), while the 364 Day bill saw a decline in its stop rate (-11bps to 18.36%).
In addition, the CBN conducted an OMO PMA, offering N600.00 billion across the 203-D and 245-D maturities. Ultimately, a total of N2.64 trillion was allotted at respective stop rates of 19.38% and 19.39%.
Looking ahead, we do not rule out continued sell-offs in the Treasury bills secondary market, which could see yields edge marginally higher in the coming week.
The FGN bond secondary market traded mixed, with the average yield rising marginally by 1bp to 16.9%.
Across the curve, the average yield decreased at the short (-11bps) and long (-1bp) ends, driven by demand for the AUG-2030 (-71bps) and JUN-2053 (-1bp) bonds, respectively, while it expanded at the mid (+2bps) segment following sell pressures in the JUN-2033 (+12bps) bond.
Notably, DMO released the Jan-2026 FGN bond offer circular, offering N900.00 billion across the FEB-2031, FEB-2034, and JAN-2035 maturities.
The 95.7% increase in the offer size (previous offer: N460.00 billion) underscores the government’s strategy of front-loading domestic borrowing to finance the fiscal deficit for 2026.
We expect bearish sentiment to persist, as market participants position ahead of the auction scheduled for Monday, January 26, with the auction outcome likely to dictate the near-term direction of yields in the FGN bond secondary market.
The OVN rate expanded by 10bps to 22.8%, as OMO PMA debits (N2.64 trillion) outweighed liquidity inflows from OMO (N1.31 trillion) and FGN bond (N1.20 trillion) maturities.
Nonetheless, average system liquidity remained strong, closing at a net long position of N4.16 trillion (prior week: N2.00 trillion).
In the absence of CBN liquidity management measures, inflows from OMO maturities (N1.87 trillion) are expected to bolster system liquidity, potentially exerting downward pressure on the OVN rate.
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