SAT MAY 16 2026-theGBJournal| Nigeria’s fixed income market closed the week on a cautious and largely bearish note as investors adjusted portfolios ahead of fresh sovereign debt supply and the Central Bank of Nigeria’s (CBN) aggressive Open Market Operations (OMO) auction.
Treasury bills yields rose across the curve amid heightened sell pressure, while activity in the bond market reflected growing expectations of increased supply at the Debt Management Office’s (DMO) upcoming auction.
The week was further shaped by strong liquidity conditions in the banking system, although liquidity moderated slightly following substantial OMO debits.
The Treasury bills secondary market traded bearish, with the average yield climbing by 15 basis points to 18.9%, reflecting weaker demand and renewed portfolio rebalancing by investors seeking higher returns at the primary market auction.
Activity across the Nigerian Treasury Bills (NTB) segment was relatively muted, as average yields closed flat at 17.5%.
However, sentiment in the OMO secondary market weakened significantly, with average yields rising by 9 basis points to 21.1% as investors unwound existing positions in preparation for the CBN’s midweek OMO auction.
At the auction, the CBN offered a total of N600 billion across the 35-day, 70-day, and 126-day maturities.
Investor appetite remained exceptionally strong despite the relatively short tenors, underscoring sustained demand for high-yield government securities amid limited alternative investment opportunities in the broader market.
Total subscriptions surged to N2.71 trillion, representing an oversubscription of more than four times the amount offered.
In response to the strong demand, the apex bank allotted a substantially larger N1.57 trillion across the three maturities.
Stop rates settled at 21.54% for the 35-day instrument, 20.70% for the 70-day paper, and 20.10% for the 126-day tenor, reinforcing the elevated yield environment and the CBN’s continued tight monetary stance aimed at containing inflationary pressures and managing excess liquidity.
Meanwhile, the Federal Government bond secondary market also traded on a mildly bearish note, with the average benchmark yield inching higher by 1 basis point to 16.1%.
Investor sentiment remained cautious ahead of the DMO’s scheduled bond Primary Market Auction (PMA) next Monday, where fresh supply is expected to test market demand.
Across the benchmark curve, the mid-tenor segment recorded the most pronounced weakness, with average yields expanding by 4 basis points following selloffs in the APR-2029 bond, whose yield jumped by 43 basis points.
The bearish sentiment in the mid-segment suggests investors are demanding higher compensation amid expectations of increased borrowing and elevated interest rate conditions.
Conversely, the short end of the curve attracted selective buying interest, causing average yields to decline by 7 basis points. The rally was primarily driven by demand for the MAR-2027 bond, whose yield compressed by 28 basis points.
The long end of the curve, however, remained largely unchanged, indicating a wait-and-see approach among institutional investors.
Attention is now turning to the DMO’s bond auction scheduled for May 18, where the agency plans to reopen the JAN-2035 and APR-2037 bonds with a combined offer size of N600 billion.
Market participants are closely watching the auction for pricing direction and indications of investor risk appetite amid persistently high yields in the money market.
In the interbank market, the Overnight (OVN) lending rate remained broadly stable at 22.2%, supported by significant liquidity inflows from maturing OMO instruments worth N2.07 trillion.
However, these inflows were partially offset by N1.57 trillion in debits arising from the OMO auction allotments.
As a result, overall system liquidity moderated slightly, with the average net long position declining to N5.21 trillion from N5.62 trillion recorded in the previous week.
The moderation reflected weaker liquidity conditions at the start of the week, although the financial system remained firmly awash with cash.
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