Investors pour N6.1tn into OMO auction as demand surges - Punch Newspapers

Demand for Central Bank of Nigeria (CBN) open market operation bills remained strong last week, with investors submitting bids worth N6.1tn for securities offered by the apex bank. The strong appetite came as investors moved to secure prevailing yields on naira-denominated fixed-income instruments following the recent reduction in the benchmark interest rate. The CBN had offered OMO bills valued at N1tn across 68 days, 152 days and 180 days. Investor subscriptions were more than six times the amount available, underscoring the depth of demand at the auction. Despite the heavy oversubscription, the CBN allotted N2.3tn to successful bidders. No allocation was made on the 68-day instrument, while the 152-day and 180-day securities recorded stop rates of 17.29 per cent and 16.99 per cent, respectively.See more Punch stories on Google.Add Punch on Google Market participants said the auction showed that investors remain keen to lock in relatively attractive yields even as monetary conditions begin to shift toward lower interest rates. Analysts noted that the appetite for OMO bills could reflect expectations that short-term market yields will continue to decline as the effects of the recent monetary policy adjustment filter through the financial system. The CBN had, on 22 September, cut its benchmark interest rate by 350 basis points from 26.5 per cent to 23 per cent. The policy is beginning to filter into the financial markets, with yields declining. Oil exports lift Nigeria’s external earnings in Q2 FG cuts Ways and Means debt by N613bn Nigerian FX market surges 11% to $2.63bn The OMO sale helped absorb liquidity from the banking system, contributing to softer money market conditions after the auction. However, a fresh liquidity boost is expected this week, with about N2.43tn in OMO maturities and another N164bn in bond coupon payments due to enter the financial system. The anticipated inflows could influence short-term interest rates and trading conditions across the fixed-income market. Cowry Asset Limited said the sharp fall in primary-market stop rates, combined with demand significantly exceeding available supply, could put additional downward pressure on secondary market yields. The repricing of fixed-income securities is expected to continue as investors adjust portfolios to reflect the lower policy rate environment. Odinaka Anudu

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