Strong demand persists as 1-year T-bills yield falls to 16.20%

Investors strong demand for longer-dated Nigerian Treasury Bills pushed the one-year yield down to 16.20 percent at the Central Bank of Nigeria’s primary market auction held on Wednesday.

The 364-day bill recorded the highest level of demand, with subscriptions of N2.63 trillion against an offer of N500 billion, underscoring sustained investor preference for locking in risk-free returns over a longer horizon.

“Investor demand remained concentrated on the longer end of the curve, particularly the 364-day bill, as market participants continue to seek attractive risk-free yields over a longer holding period,” said Ayodeji Ebo, managing director of Optimus by Afrinvest.

Reflecting this demand, stop rates declined on the longer tenors, with the 364-day bill settling at 16.20 percent, down by 23 basis points, while the 182-day bill also fell by the same margin to 16.19 percent.

The 91-day bill, however, held steady at 15.95 percent, indicating relatively softer demand at the short end.

Auction data showed that while the long tenor remained dominant, demand broadened across the curve. The 182-day bill attracted N227.94 billion in subscriptions against an offer of N100 billion, with N87.05 billion allotted, pointing to stronger participation in the mid-tenor segment.

In contrast, the 91-day bill recorded subscriptions of N96.78 billion, slightly below its offer size of N100 billion, with N94.82 billion allotted.

Ebo noted that the moderation in stop rates on the longer tenors reflects improving liquidity conditions and sustained institutional participation.

He added that the stronger subscription on the 182-day bill suggests investors are gradually extending duration beyond the short end, even as appetite for near-term instruments remains relatively muted.

Analysts at Meristem said yields may stabilise around current levels in the near term, although risks remain tilted to the upside at the long end.

According to the firm, expectations of a potential increase in month-on-month inflation for March, partly driven by geopolitical tensions in the Middle East, could prompt investors to demand a higher risk premium on longer-dated instruments.

The auction highlights a persistent bias toward longer-tenor Treasury Bills, with investors continuing to lock in yields as rates trend lower.

For investors, the direction of yields suggests a narrowing window to lock in higher returns. With rates already trending downward on longer tenors, those with longer-term liquidity may increasingly consider extending duration, while remaining mindful of inflation risks that could influence yields in the coming months.