MON JUNE 01 2026-theGBJournal| The Nigerian fixed-income market sent mixed signals on Monday as liquidity conditions tightened modestly in the banking system, driving overnight funding costs higher, while investors continued to accumulate Treasury bills amid expectations of stable monetary conditions and attractive real returns.
The overnight lending rate edged up by 5 basis points to 22.2%, reflecting the absence of significant liquidity injections into the financial system.
The move suggests that despite the banking sector remaining relatively liquid, cash balances were insufficient to trigger a meaningful decline in short-term funding costs, keeping interbank rates anchored near the Central Bank of Nigeria’s monetary policy corridor.
Investor demand remained concentrated in the Treasury bills market, where secondary-market trading closed firmly bullish.
Average yields declined by 3 basis points to 17.5%, extending the recent rally as investors sought to lock in yields ahead of potential further moderation in rates.
The bullish sentiment was broad-based across the curve. Short-dated instruments led gains with yields falling 2 basis points, supported by buying interest in the 52-day bill, whose yield compressed by 3 basis points.
Mid-tenor securities also attracted strong demand, pushing average yields lower by 3 basis points, with the 94-day bill recording an 8-basis-point decline.
The strongest appetite emerged at the longer end of the curve, where yields fell 4 basis points on average, driven by aggressive demand for the 220-day instrument, whose yield dropped 16 basis points.
The sustained bid for Treasury bills highlights investors’ preference for relatively low-risk government securities amid lingering macroeconomic uncertainties.
It also reflects expectations that inflationary pressures could continue easing over the medium term, increasing the attractiveness of current yield levels.
A similar trend was observed in the Open Market Operations (OMO) segment, where average yields contracted by 4 basis points to 21.0%.
The decline indicates continued institutional demand for high-yielding CBN instruments, particularly from banks and asset managers seeking to optimize returns while maintaining liquidity buffers.
In contrast, the Federal Government bond (FGN Bond) market experienced renewed selling pressure as investors moved to crystallize gains from the recent rally.
Average benchmark bond yields rose by 11 basis points to 15.9%, marking a reversal from the bullish momentum seen in previous sessions.
The bearish tone was most pronounced at the short end of the curve, where yields climbed 26 basis points.
The March 2027 bond bore the brunt of profit-taking, with its yield surging 119 basis points as investors unwound positions accumulated during earlier market gains.
The mid-segment recorded a more modest 2-basis-point increase, driven by selling interest in the June 2033 bond, while yields at the long end rose 5 basis points, led by the June 2038 issue, which added 38 basis points.
The divergence between Treasury bills and bonds underscores a market increasingly favoring shorter-duration assets.
While investors continue to chase attractive yields in money-market instruments and OMO bills, longer-dated bonds remain vulnerable to intermittent profit-taking and concerns over inflation, fiscal borrowing requirements and the future trajectory of monetary policy.
For now, the fixed-income landscape suggests that liquidity remains sufficient to support demand for short-term government securities, but conviction in duration exposure remains fragile, leaving the bond market susceptible to bouts of volatility even as yields remain historically attractive.
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