TUE SEPT 01 2026-theGBJournal| Nigeria’s fixed-income markets delivered a mixed performance, with strong demand for Treasury bills pushing short- and medium-dated yields lower, even as investors sold selected Federal Government bonds (FGN Bonds) and the Eurobond market gave back some of its recent gains.
The overnight lending rate contracted by 9bps to 22.1%, reflecting the absence of any significant funding pressure in the banking system.
The softer overnight rate suggests that liquidity conditions remained relatively comfortable, limiting the need for banks to aggressively source short-term funds.
In the Treasury bill secondary market, sentiment remained firmly bullish, with the average yield contracting by 5bps to 18.9%. Demand was evident across the curve, although the magnitude of the move varied significantly by tenor.
Average yields contracted by 4bps at the short end, 11bps at the mid segment and 22bps at the long end. The moves were driven by buying interest in the 87-day-to-maturity bill, whose yield declined by 20bps, while the 108DTM and 311DTM bills recorded sharper yield contractions of 161bps and 59bps, respectively.
The aggressive repricing at the 108DTM tenor points to particularly strong demand for that maturity, as investors sought to lock in relatively attractive yields amid expectations around liquidity conditions and the direction of domestic interest rates.
The rally extended to the Open Market Operations segment, where the average yield contracted by 3bps to 20.3%.
The move indicates continued investor appetite for high-yielding short-term government instruments despite the relatively elevated level of domestic rates.
The picture was different in the FGN bond market, where sentiment turned bearish. The average yield expanded by 2bps to 16.6%, as investors sold selected benchmark securities.
Across the benchmark curve, yields expanded by 3bps at both the short and mid segments, driven by sell-offs in the FEB-2031 and JUN-2033 bonds, whose yields each rose by 10bps.
The long end of the curve, however, closed flat, suggesting that selling pressure was concentrated in specific maturities rather than being broad-based across the sovereign bond market.
The divergence between Treasury bills and FGN bonds underscores the different positioning across Nigeria’s fixed-income curve. While investors continued to find value in shorter-dated instruments, selected longer-duration bonds faced selling pressure, potentially reflecting a preference for instruments with lower duration risk amid uncertainty over the future path of interest rates.
Meanwhile, gains from previous sessions were reversed in Nigeria’s Eurobond market as negative sentiment returned to external debt trading. The average yield increased slightly to 6.91%, from 6.90%.
The move came as US Treasury yields climbed to their highest level since January 2025, putting renewed pressure on emerging-market dollar-denominated debt.
Higher US government bond yields can make US assets relatively more attractive to global investors, potentially raising the required risk premium on Nigerian and other emerging-market Eurobonds.
Overall, the session highlighted a two-speed fixed-income market: domestic liquidity remained supportive of Treasury bill demand, while selected FGN bonds and external dollar debt faced pressure as investors reassessed duration and global interest-rate risks.
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