Paragraph 1: Surge in Demand at CBN Treasury Bills Auction
The Central Bank of Nigeria (CBN) witnessed a significant surge in investor interest during its recent treasury bills primary auction held on May 21, 2025. Total bids reached an impressive N1.17 trillion, demonstrating a robust appetite for government securities despite prevailing high inflation and a stable interest rate environment. This strong demand underscores the attractiveness of treasury bills as an investment option in the current economic climate. The auction saw the CBN offer N500 billion in treasury bills, slightly less than the N503 billion offered in the previous auction. However, subscriptions significantly outstripped the offer, totaling N1.21 trillion, a notable increase from the N1.09 trillion recorded in the prior auction.
Paragraph 2: Investor Preference for Longer-Term Instruments
The surge in subscriptions was largely driven by strong demand for the 364-day treasury bill, which attracted bids worth N1.05 trillion against an offer of N350 billion. This indicates a growing investor preference for longer-dated instruments, likely reflecting expectations of continued attractive yields in the medium term. The CBN allotted a total of N615.81 billion, exceeding the N579 billion allotted in the previous auction. The stop rate for the 364-day bill declined marginally to 19.56 percent from 19.63 percent at the previous auction, while the rates for the 91-day and 180-day bills remained stable at 18.00 percent and 18.50 percent, respectively.
Paragraph 3: Debt Management Office Auction and Market Dynamics
The Debt Management Office (DMO) also conducted an Open Market Operation (OMO) auction, offering N500 billion across 182-day and 210-day tenors. This auction mirrored the strong demand seen in the CBN’s auction, attracting total subscriptions of N743.25 billion. The DMO allotted N804.34 billion, with stop rates settling at 23.77 percent for the 182-day and 23.98 percent for the 210-day instruments. These strong subscription levels in both the CBN and DMO auctions highlight the prevailing search for yield among investors in the current high-interest rate environment, despite concerns about inflation and fiscal pressures.
Paragraph 4: Mixed Performance Across Debt Markets
Despite the robust demand in the primary market, the secondary treasury bills market experienced a bearish trend, with average yields rising by four basis points to 20.88 percent. This shift was primarily driven by sell-offs in shorter-dated bills, pushing short-end yields up by 69 basis points. Conversely, the long end of the curve saw yields decline by 33 basis points due to increased demand for longer-term maturities. The local bond market, however, traded positively, albeit with subdued activity. Average yields declined by three basis points to 18.99 percent, fueled by buying interest in bonds across the short and mid-segments of the yield curve. The long end of the bond market experienced a slight uptick in yields due to some sell-offs.
Paragraph 5: Eurobond Market Maintains Bullish Momentum
The Eurobond market maintained its positive trajectory, with average yields decreasing by two basis points to 9.76 percent. This continued bullish performance can be attributed to growing investor confidence in Nigeria’s external debt profile and the easing of global risk factors. The decline in yields was particularly pronounced in longer-term Eurobonds, suggesting increased optimism about Nigeria’s long-term economic prospects. This positive sentiment in the Eurobond market contrasts with the mixed performance observed in the domestic debt markets, highlighting the varying dynamics influencing investor behavior across different segments of the fixed-income market.
Paragraph 6: Investor Sentiment and Market Outlook
The observed trends in the various debt markets indicate that investors are actively recalibrating their positions in response to ongoing macroeconomic uncertainties. While the strong demand in primary auctions reflects a positive outlook for Nigerian debt instruments, the mixed performance in the secondary markets suggests a degree of caution and selectivity among investors. The attractive yields offered by Nigerian debt continue to be a significant draw, attracting both domestic and international investors. However, factors such as inflation, fiscal pressures, and evolving global economic conditions are influencing investor decisions and contributing to the observed market volatility. The overall market sentiment appears to be cautiously optimistic, with investors balancing the potential for returns with the inherent risks in the current economic environment.
