Investors’ Appetite for FGN Bonds Ease Ahead of Q1 Supply

Investors’ Appetite for FGN Bonds Ease Ahead of Q1 Supply

Investors’ appetite for the Federal Government of Nigeria (FGN) tightened with subdued trading activities in the secondary market ahead of anticipated huge supply.

The Debt Management Office is scheduled to launch its 2026 borrowing plan, and market expectations remain that the widening budget deficit will enhance supply.

The expectation, and latest disinflation reversal, has triggered some portfolio adjustment as wealth managers, pension fund administrators and other continue to device trading approach to optimise return.

Despite disinflation, real return on fixed income market securities remained at double digit. Analysts are also adjusting their thinking with spot rates repricing initiated by the Apex Bank in the last quarter of 2025.  In the secondary market last week, appetite for local bonds was negative as investors continue to trimming their positions.

Due to sell pressures across tenors, the average benchmark yield on FGN bonds expanded by +12 basis points (bps) week on week to close at 16.75%.

The FGN bond market started the week cautiously, with mild sell pressure and limited participation as investors positioned ahead of December inflation data, pushing the average benchmark yields higher at around 16.80% at the start, reflecting uncertainty around policy direction.

Mid-week activity remained subdued, with most maturities closing flat amid thin liquidity and cautious sentiment, investment firm AIICO Capital reported.

Traders said momentum shifted toward the latter part of the week following the release of December CPI at 15.15%, which came in softer than expectations due to methodological adjustments.

AIICO Capital said this triggered renewed demand for short-to-mid tenors on Thursday; notably, the 21-Feb-31 and 15-May-33 bonds recorded notable yield compression.

The positive sentiment was sustained on Friday on selected maturities like 15-May-33, 21-Feb-2031 and 17-May-2029, recording yield compression of -11 bps (17.53%), -10 bps (17.49%) and -6 bps (17.37%), respectively.

The average benchmark yield rose by 12 bps to close the week at 16.75%, as the late-week positive sentiment was unable to offset the early cautious reaction. #First Holdco Gains 12.8% as Investors Tag Along with Otedola