SAT AUG 23 2025-theGBJournal| The FGN bond secondary market closed the week on a bearish note as investors reacted to the higher-than-expected stop rate at the NTB auction.
The average yield expanded by 8bps to 16.7%. Across the benchmark curve, the average yield increased at the short (+2bps), mid (+11bps) and long (+5bps) segments, driven by selloffs of the APR-2029 (+42bps), FEB-2031 (+24bps) and JUN-2038 (+38bps) bonds, respectively.
Over the medium term, we expect a moderation in bond yields, influenced by two factors – the anticipated dovish monetary policy stance and demand and supply dynamics.
The overnight (OVN) rate declined by 325bps w/w to 29.2%, bolstered by inflows from OMO maturities (N854.46 billion) despite the increased uptakes at the Central Bank f Nigeria’s (CBN) Standing Lending Facility (SLF) window (weekly average: N360.19 billion vs N294.80 billion in the prior week).
Accordingly, the average system liquidity improved, settling at a net long position of N159.40 billion (vs a net long position of N62.94 billion in the previous week).
In the absence of liquidity management measures by CBN, we expect the inflows from FGN bond coupon payments (N113.62 billion) and OMO maturities (N758.00 billion) to support system liquidity, weighing on the OVN rate.
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