CBN mops up N3.85tn in OMO auction as investors pile into longer bills at lower rates
The CBN allotted N3.854 trillion at its November 10 OMO auction, far exceeding the N1.5 trillion on offer as investors rushed into longer-dated securities. Total subscriptions hit N4.069 trillion — a 2.71x bid-to-cover ratio — with the apex bank accepting 94.7% of bids.
The 329-day bill (maturing October 5, 2027) dominated, attracting N2.82 trillion in bids against a N500 billion offer. The CBN allotted N2.79 trillion at 15.99%. The 252-day bill (maturing July 20, 2027) took N783.5 billion at 16.68%. Meanwhile, the 154-day instrument was undersubscribed — only N457.89 billion bid for N500 billion offered — with N280.76 billion allotted at 17.44%.
This continues a pattern of aggressive liquidity absorption. The November 3 auction saw N2.95 trillion allotted; November 6 only N724 billion. Standing Deposit Facility balances hit N8.31 trillion as of November 6, giving banks ample cash to deploy. The 145 basis-point spread between the shortest and longest tenors shows investors locking in lower yields for longer, likely betting on declining rates ahead.
For fixed-income investors, the message is clear: the market expects rates to fall. Treasury bill and OMO yields on longer tenors are pricing in future cuts. If you're rolling over short-term positions, the 329-day at 15.99% locks in a decent carry — but only if you're comfortable with duration risk.
Will you extend duration to capture the current long-end yield, or stay short expecting even lower rates when the CBN eventually pivots?