CBN rejects N4.9trn in OMO bills subscription, money market liquidity hits

The liquidity level in the financial system surged to N6.12 trillion as the Central Bank of Nigeria (CBN) rejected about N4.9 trillion subscription for its OMO bills auction on Tuesday.

System liquidity closed at a net long position of ₦6.12 trillion, supported by an OMO repayment totaling ₦2.14 trillion and enhanced placement by deposit money banks.

The Central Bank of Nigeria (CBN) had rejected subscriptions totalling N4.9 trillion staked on OMO bills by the eligible market participants at the auction conducted on Tuesday.

Amidst excess liquidity conditions in the financial system, the CBN floated N600 billion in OMO bills in an attempt to refinance expired bills totaling N2.14 trillion due for repayment

Fixed income analysts had anticipated the auction to be well received as the money market hits about N4 trillion in net long position.

At auction, N600.0 billion worth of OMO bills was on offer across 2 tenors. While subscription totaled N4.9 trillion, the auction ended with no sale or allotment being made, investment firms reported.

In the Treasury Bills segment, secondary market yields displayed mixed movements, with the 1-month, 6-month, and 12- month maturities declining by 9bps, 9bps, and 4bps respectively, whereas the 3-month tenor rose 2bps.

The average yield on Nigerian Treasury bills fell 1bp to 18.46%, indicating improved investor confidence and a more supportive environment in the secondary market. CBN Rejects N4.9 Trillion in OMO Bills Subscription

The market recorded an increase in banks’ placements at CBN’s Standing Deposit Facility (SDF) window to ₦3.92 trillion. Also, some banks with liquidity shortfall borrowed ₦14.30 billion from the Standing Lending Facility (SLD) window.

Consequently, funding rates, the overnight lending rate, and the open repo rate (OPR) remained firm at 22.79% and 22.50%, respectively, according to data from the FMDQ.

Nigerian Treasury bills traded bullishly in the secondary market on the back of rising interest in the naira asset. Hence, the average benchmark yield declined marginally by -1bp to close at 18.45%.

Similarly, proceedings in the secondary market for OMO market also had a bullish undertone as the average benchmark yield declined marginally by -1bp to close at 22.15%.

System liquidity will likely remain buoyant despite the upcoming debit from the latest FGN bond auction and expected OMO auction. The financial system liquidity is expected to drop after the settlement of ₦1.54 trillion for the Jan-26 Bond auction on Wednesday.

The CBN floated an OMO bill auction totalling N600 billion across two standard tenors to mop up excess liquidity in the financial system. However, subscription came strongly. Investors staked N4.9 trillion, but there was no allotment. Money Market Liquidity Hits N6trn as CBN Refuses OMO Bids