Treasury bills rally as N2.4trn unmet demand drives yield lower

Nigerian Treasury bills extended their rally in the secondary market as strong investor demand following the Central Bank of Nigeria’s midweek auction pushed yields lower, with more than N2.4 trillion in unsuccessful bids flowing into outstanding securities.

The decline in yields came after investors redirected excess liquidity into the secondary market following the oversubscribed auction, reinforcing demand for short-term government securities despite elevated interest rates.

At the auction, total subscriptions reached N3.62 trillion against an offer of N700 billion, while the Debt Management Office (DMO) allotted N1.25 trillion, leaving over N2.37 trillion in unmet demand.

The robust appetite reflected continued investor preference for Treasury bills as elevated inflation and tight monetary policy sustain attractive real returns on naira-denominated fixed-income instruments.

Market analysts said trading remained mildly bullish across the Treasury bills curve as investors sought to deploy funds that were not allotted at the primary auction.

According to AIICO Capital Limited, yields eased slightly across all tenors, with the newly issued 29 July 2027 Treasury bill declining to 17.00 per cent, while the average benchmark discount rate remained unchanged at 16.66 per cent.

The investment firm attributed the rally to renewed buying interest from investors seeking exposure to the fresh issue after failing to secure sufficient allocations at the primary market.

Demand at the auction was strongest for the 364-day Treasury bill, enabling the DMO to reprice the long-tenor instrument amid overwhelming subscription levels.

Herwood Capital Limited said the newly issued 29 July 2027 Treasury bill opened trading in the secondary market at 17.20 per cent/17.05 per cent, with transactions executed at 17.10 per cent, 17.07 per cent and 17.02 per cent before closing the session at 17.10 per cent/17.05 per cent.

Consequently, the average Treasury bill yield compressed by one basis point to 18.15 per cent, reflecting sustained investor demand for government securities.

The latest market activity underscores continued confidence in Nigeria’s Treasury bills market, with investors maintaining strong appetite for risk-free instruments as high interest rates and inflation continue to support attractive yields.