…The Treasury bill secondary market traded on a quiet note, with the average yield unchanged at 18.9%.
WED SEPT 02 2026-theGBJournal| Nigeria’s money markets showed mixed signals, with overnight funding costs rising despite a substantial ₦2.25 trillion injection from Open Market Operations (OMO) maturities, while government bonds attracted buying interest and the Eurobond market remained under pressure.
The overnight lending rate expanded by 7 basis points to 22.2%, despite inflows from OMO maturities worth ₦2.25tn.
The rise in overnight funding costs suggests that liquidity conditions remained relatively tight even after the sizeable maturity-related inflow, with demand for short-term funds continuing to outweigh the immediate impact of the system liquidity injection.
The Treasury bill secondary market traded on a quiet note, with the average yield unchanged at 18.9%. Trading across the curve, however, reflected divergent investor positioning.
At the short end, the average yield contracted by 1 basis point, driven by buying interest in the 86-day-to-maturity (DTM) bill, while the long end declined by 2bps, supported by demand for the 345DTM bill, whose yield fell sharply by 22bps.
The moves indicate selective demand for government paper rather than a broad-based shift in Treasury bill pricing.
The mid segment moved in the opposite direction, with the average yield expanding by 3bps as selling pressure pushed the yield on the 100DTM bill up by 25bps.
The divergence across maturities suggests investors continued to rotate between tenors in response to liquidity conditions and relative value rather than taking an outright directional position across the Treasury bill curve.
The OMO segment was considerably weaker. Its average yield expanded by 39bps to 20.7%, highlighting the continued premium investors are demanding on these instruments amid the prevailing liquidity dynamics.
The contrast between broadly stable Treasury bill yields and the sharp repricing in OMO instruments is particularly relevant for fixed-income investors assessing short-term carry opportunities and the relative attractiveness of sterilisation instruments.
FGN bonds attract demand as yields fall
The FGN bond secondary market, meanwhile, traded on a bullish note, with the average yield contracting by 5bps to 16.5%.
Buying interest was concentrated in the middle and longer portions of the curve. The average yield in the mid segment declined by 1bp, driven by demand for the March 2035 bond, whose yield fell by 3bps.
At the long end, yields contracted by 13bps, supported by strong demand for the July 2045 bond, which saw its yield decline by 28bps.
The strength at the long end points to renewed investor appetite for duration, potentially reflecting a search for capital gains and higher carry as investors assess the trajectory of domestic inflation, monetary policy and government borrowing conditions.
The move was not uniform across the curve. The short end saw the average yield expand by 2bps, largely because of selling in the February 2028 bond, whose yield rose by 9bps.
The contrasting performance reinforces the selective nature of current positioning, with investors appearing more willing to add exposure to longer-dated government debt while trimming some shorter-tenor holdings.
Eurobonds remain under pressure
Elsewhere, negative sentiment continued to govern trading activities in Nigeria’s Eurobond market.
The average yield jumped by 7bps to 6.98%, from 6.91%, pointing to renewed selling pressure and a deterioration in the pricing of Nigeria’s external sovereign debt.
The rise in Eurobond yields contrasts with the bullish tone in the domestic FGN bond market and highlights the different risk factors being priced into Nigeria’s local- and foreign-currency debt.
For international investors, the increase in Eurobond yields represents a higher required return for holding Nigerian sovereign external debt. The move also suggests that, despite relatively stronger demand for selected domestic government bonds, external investors remain cautious about Nigeria’s dollar-denominated risk.
Overall, the session reflected a market divided between selective domestic fixed-income demand and persistent external-market caution. Investors continued to find value in parts of the FGN bond curve, particularly at the longer end, while Treasury bills remained broadly stable and OMO yields moved sharply higher.
At the same time, the rise in overnight funding costs despite ₦2.25tn of OMO maturities indicates that domestic liquidity conditions remain an important driver of near-term pricing.
The combination of higher money-market rates, selective duration demand and rising Eurobond yields leaves investors balancing carry opportunities against liquidity, interest-rate and sovereign-risk considerations.
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