Investors submit bids more than eight times the N600bn on offer as OMO yields remain above comparable Treasury Bills…..
The Central Bank of Nigeria has recorded another strong showing of investor demand at its latest Open Market Operations auction, receiving N4.93 trillion in subscriptions against a combined offer of N600 billion.
The auction, conducted on Thursday, August 13, featured 103-day and 138-day bills, with N300 billion offered on each tenor, according to data released by the apex bank.
Despite the limited amount on offer, the CBN allotted N2.60 trillion across the two instruments, more than four times the amount initially advertised.
The latest auction continues a pattern of heavy investor participation in the CBN’s OMO programme this year, with demand consistently exceeding the amount offered even amid aggressive liquidity management by the apex bank.
The 103-day bill, scheduled to mature on November 24, attracted N1.268 trillion in subscriptions, representing more than four times the N300 billion offered.
The CBN allotted N450 billion on the instrument, with bids ranging from 19.90 per cent to 20.46 per cent and a stop rate of 20.39 per cent.
Demand was significantly stronger for the 138-day bill, which recorded N3.658 trillion in subscriptions, more than 12 times the N300 billion on offer.
The apex bank allotted N2.154 trillion on the instrument, with bid rates ranging from 19.79 per cent to 20.10 per cent and a stop rate of 20.01 per cent. Its true yield stood at 21.66 per cent.
Interestingly, the longer-dated 138-day bill attracted substantially greater demand while clearing at a lower stop rate than the shorter 103-day instrument.
The strong appetite for the securities reflects the attractiveness of OMO yields compared with other fixed-income instruments in the current high-interest-rate environment.
The widening pool of eligible investors is also expected to support demand, following the CBN’s move to make OMO bills accessible to retail investors through banks rather than limiting participation primarily to institutional money market dealers.
The broader access could further intensify competition among banks for deposits as lenders seek to retain funds that investors may otherwise channel into OMO securities offering relatively attractive returns.
Analysts expect this trend to gradually push deposit rates higher and encourage some convergence between Treasury Bill and OMO yields.
Using stop rates and comparable maturities, the gap between OMO and Treasury Bill yields remains significant.
The 103-day OMO bill cleared at 20.39 per cent, compared with 16.30 per cent for the 91-day Treasury Bill, representing a difference of 409 basis points.
Similarly, the 138-day OMO instrument’s 20.01 per cent stop rate compared with 16.50 per cent for the 182-day Treasury Bill gives a yield differential of 351 basis points.
The latest auction comes against the backdrop of heightened liquidity management by the CBN.
Just a week earlier, the banking system recorded a net liquidity injection of N5.21 trillion, including a N2.48 trillion OMO repayment on August 11.
The latest auction also follows the N4.69 trillion withdrawn through OMO auctions conducted on August 3 and 4, while more than N7 trillion was absorbed through OMO operations in July.
Despite these substantial liquidity movements, investor demand has remained elevated across successive OMO auctions, suggesting that substantial liquidity is still available within the financial system.
With OMO stop rates now around 20 per cent, the securities continue to offer significantly higher returns than comparable Treasury Bills, reinforcing their appeal to investors seeking relatively low-risk investments.
The increased access to OMO securities also means individual Nigerian investors can now participate through their banks, alongside institutional investors, in what has become one of the CBN’s key tools for managing liquidity in the financial system.
