FGN Bonds Yield Rises on Investors’ Rotation, Q4 Supply Update
The Federal Government of Nigeria (FGN) bonds yield surged in the secondary market due to sell pressures from investors that adjusted their portfolio holdings ahead of Q4 supply.
The benchmark yield on local bonds continues to track below 16% versus an inflation rate of 18.02% year on year. There were sell actions on Federal Government of Nigeria (FGN) bonds across the belly and long end of the curve.
A selloff on local bonds paper that will expire in 2033 pushed the yield higher by 11 basis points. Yield on FGN bonds with APR 2049 maturity climbed by 10 basis points due to sell pressure, while June 2033 bonds yield rose by 7 basis points.
Investors rebalanced their positions following the release of the Q4 2025 issuance calendar, which showed an increased offer size of N120 billion – N150 billion, up from N100 billion in the previous quarter.
In a note, Cowry Asset Limited told investors that the initial sell-off reflected investor reaction to the lower-than-expected inflation print of 18.02% for September, which spurred a round of repricing and profit-taking across select maturities.
However, fixed income market analysts noted that momentum turned bullish midweek, with renewed buy interest particularly in the 2030s segment, as investors took advantage of attractive entry levels.
Consequently, the average yield on benchmark bonds declined by 1 bp to 15.97%, underscoring improved sentiment and confidence in the market’s medium-term outlook.
Fixed interest market analysts expect the bullish momentum in both local and external debt markets to persist as investors reassess portfolio allocations amid moderating inflation, improving fiscal outlook, and stabilising global yields.
Investment firms expect market tone should remain upbeat, supported by expectations of monetary policy easing and sustained foreign investor interest in high-yield emerging market assets.
Disinflation will continue to affect Nigerian bonds yield pricing. Benchmark yield is expected to fall on both rising appetite for naira assets, backed by robust financial system liquidity.
The National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation eased for the sixth consecutive month to 18.02% year on year in September 2025 from 20.12% in August 2025. The continued disinflation was largely driven by broad-based declines across food and core components.
In the secondary fixed income market, sentiment is expected to remain bullish, especially on long-dated instruments, as investors take advantage of the softer inflation outlook and prospects of further monetary policy easing.
Accordingly, Cowry Research anticipates that while the yield curve may remain inverted in the near term, a gradual normalization is likely as spreads between short- and long-term maturities narrow
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