TUE JUNE 02 2026-theGBJournal| Nigeria’s fixed-income market delivered yet another mixed signals on Tuesday as renewed demand for Treasury bills compressed short-term yields, while investors trimmed positions in Federal Government bonds, pushing benchmark yields higher.
The divergence underscores a market increasingly split between investors seeking liquidity and those reassessing duration risk amid evolving monetary and inflation expectations.
The naira, meanwhile, strengthened modestly in the official foreign-exchange market, appreciating 0.2% to close at N1,364 per dollar.
The gain extended recent currency stability and reflected sustained foreign-exchange supply alongside improving confidence in the official market.
Liquidity conditions in the banking system remained broadly comfortable. The overnight lending rate eased by 7 basis points to 22.2%, indicating the absence of significant funding pressures among lenders and suggesting that financial institutions had sufficient liquidity to meet short-term obligations without aggressively borrowing in the interbank market.
The Treasury bills secondary market maintained a bullish tone as investors continued to accumulate short-dated government securities. Average yields declined by one basis point to 17.5%, extending demand-driven gains across the curve.
Yield compression was recorded in the short, mid and long tenors, each declining by one basis point.
Market participants showed particular interest in the 79-day (-1bp) , 170-day (-1bp) and 275-day (-15bps) instruments, with the latter posting the sharpest move as its yield fell by 15 basis points.
The buying interest reflects investors’ preference for locking in relatively attractive risk-free returns while retaining flexibility ahead of future monetary policy decisions and debt auctions.
The bullish sentiment also spilled over into the Central Bank of Nigeria’s Open Market Operations (OMO) segment, where average yields declined by one basis point to 21.0%.
The sustained appetite for OMO bills suggests that institutional investors, including banks and asset managers, continue to favour high-yielding short-term instruments despite expectations that inflationary pressures could remain elevated in the medium term.
In contrast, Nigeria’s sovereign bond market came under selling pressure, reversing some of the gains recorded in previous sessions.
Average yields in the Federal Government bond secondary market rose by 11 basis points to 15.9%, reflecting investor profit-taking and portfolio rebalancing activities.
The selloff was most pronounced at the short end of the curve, where average yields climbed 25 basis points.
The March 2027 bond led losses, with its yield surging 114 basis points. The mid-segment also weakened, as the June 2033 benchmark bond recorded a nine-basis-point increase in yield, while the long end of the curve saw yields rise five basis points, driven largely by selling interest in the June 2038 bond, whose yield advanced 38 basis points.
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