TUE SEPT 08 2026-theGBJournal| Nigeria’s fixed-income market delivered a mixed signal on Minday as investors increased demand for Treasury bills even as government bonds came under pressure, highlighting divergent positioning across the yield curve amid constrained system liquidity.
The overnight lending rate expanded by 5bps to 22.2%, in the absence of any significant inflows into the system.
The move points to continued pressure in the money market, with limited liquidity support leaving banks and other market participants paying more to secure short-term funds.
Despite the tighter liquidity conditions, the Treasury bill secondary market traded on a bullish note, with the average yield contracting by 5bps to 18.8%.
The decline in yields indicates stronger demand for short-dated government paper, as investors continued to seek relatively attractive returns in the money-market segment.
Across the Treasury bill curve, the average yield contracted at the short (-3bps), mid (-3bps) and long (-9bps) segments. Demand was strongest for the 87DTM (-3bps), 178DTM (-3bps) and 283DTM (-35bps) bills, respectively.
The sharp 35bps decline in the yield of the 283DTM bill stands out, suggesting particularly strong buying interest in the longer-dated Treasury bill segment.
For investors, the move could signal a willingness to lock in prevailing yields before market rates potentially soften further.
The bullish tone extended to the Open Market Operations (OMO) segment, where the average yield contracted by 4bps to 20.5%, reinforcing the broader demand for short-term government securities.
The picture was markedly different in the FGN bond market.
The FGN bond secondary market traded on a bearish note, with the average yield expanding by 6bps to 16.5%.
The rise in yields points to renewed selling pressure and weaker demand for sovereign bonds, particularly at the front end of the benchmark curve.
Across the benchmark curve, the average yield expanded at the short (+22bps) and long (+2bps) ends.
The short-end sell-off was particularly pronounced, driven by the MAR-2027 bond, whose yield surged by 194bps.
At the long end, the JUN-2038 bond also came under pressure, with its yield rising by 7bps.
However, the weakness was not uniform across the curve.
The mid segment bucked the broader trend, with the average yield contracting by 8bps, supported by demand for the MAR-2036 bond, whose yield fell by 27bps.
The divergence between Treasury bills and FGN bonds suggests investors are currently favouring shorter-duration instruments over longer-term sovereign exposure.
Strong demand for Treasury bills has compressed yields, while selling in selected FGN bonds has pushed yields higher.
The immediate driver appears to be liquidity conditions: the overnight rate rose to 22.2% in the absence of significant system inflows, increasing the appeal of liquid, short-duration instruments while potentially making investors more cautious about extending duration.
The sharp repricing of the MAR-2027 bond is particularly notable.
A 194bps jump in its yield represents a significant adjustment and could create opportunities for investors willing to take on duration risk, but it also signals that the market remains sensitive to liquidity and rate expectations.
Overall, Monday’s trading points to a market in which investors remain selective rather than uniformly bullish on Nigerian government securities — buying Treasury bills and specific bonds while aggressively selling other parts of the FGN curve.
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