SAT JULY 25 2026-theGBJournal| Nigerian Treasury yields declined sharply over the past week as abundant banking system liquidity and strong investor appetite for government securities drove demand across the secondary market.
The rally was reinforced by the absence of Treasury bill primary issuances and spillover demand from the Federal Government bond auction, pushing investors into outstanding securities and sending yields lower across both Treasury bills and FGN bonds.
Money market conditions remained broadly stable during the week, with the overnight lending rate holding at 22.2%, despite a moderation in system liquidity.
Liquidity was supported by ₦1.78 trillion in Open Market Operation (OMO) maturities and ₦1.50 trillion in Federation Account Allocation Committee (FAAC) disbursements, which largely offset liquidity withdrawals from a ₦2.60 trillion Cash Reserve Ratio (CRR) debit and ₦931.82 billion in Federal Government bond auction settlements.
As a result, average banking system liquidity eased to a net long position of ₦3.51 trillion, compared with ₦4.44 trillion in the previous week.
The improved liquidity backdrop, coupled with the lack of fresh Treasury bill issuance, triggered a broad-based rally in the secondary market. Investors redirected funds into existing instruments, driving the average Treasury bill yield down by 17 basis points to 19.4%.
Across market segments, yields on Nigerian Treasury Bills (NTBs) declined by 13 basis points to 18.3%, while OMO bill yields also fell by 13 basis points to 21.4%, reflecting sustained demand for short-term government securities.
The bullish sentiment extended to the Federal Government bond market, where the average secondary market yield fell by 24 basis points to 17.4% as investors sought bonds after demand at the primary auction outstripped the amount offered.
Buying interest was concentrated across the yield curve, with average yields declining by 4 basis points at the short end, 33 basis points in the mid-tenor segment and 17 basis points on longer-dated maturities.
The strongest demand was recorded for the March 2027, March 2036 and June 2038 benchmark bonds, whose yields compressed by 25 basis points, 56 basis points and 62 basis points, respectively.
At the week’s bond auction, the Debt Management Office (DMO) reopened the January 2035, April 2037 and June 2038 bonds, offering a combined ₦1.20 trillion. Investor demand reached ₦1.74 trillion, underscoring continued appetite for sovereign debt despite elevated interest rates.
The DMO ultimately allotted ₦931.82 billion, leaving a sizeable portion of bids unmet and prompting investors to seek exposure in the secondary market, further reinforcing the rally.
Stop rates on the January 2035 and April 2037 bonds remained unchanged from the previous auction at 18.34% and 18.35%, respectively, while the newly reopened June 2038 bond cleared at 18.40%, signalling the DMO’s decision to maintain borrowing costs even as demand remained robust.
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