FGN Bonds Yield Slides to 16.59% as Investors Boost Holdings
The average yield on Federal Government of Nigeria (FGN) bonds fell to 16.59% in the secondary market as investors anticipate higher supply for September.
The monthly auction for September will be held in the coming days, and analysts believe the Central Bank of Nigeria (CBN) interest rate decision will influence yield directions.
Trading in the fixed income market was marginally bullish this week, with most activity concentrated at the short- and mid-segments of the curve.
Investors continue to build naira portfolios with Nigerian bonds across short, mid and long duration due to surplus liquidity in the financial system, and positive real interest rate.
Real interest rate surged to 7.38% after consumer price index data showed that headline inflation fell to 22.12% in August.
The market opened on a cautious note last week following rumours that the government may issue N758.0 billion in bonds to clear outstanding pension liabilities before the first week of October.
By the close of the session, there was some buying interest at the short end (-2bps) of the curve, notably the local bonds which are scheduled to expire in 2030 and 2031.
On the long end, investors remained cautious, holding back amid expectations of a gradual decline in interest rates while attention shifted toward the upcoming primary market auction for FGN bonds.
As a result, average bond yields declined by 8 basis points week-on-week to settle at 16.59%, driven by notable drops on the March 2026 and January 2026 papers, which fell by 132bps and 82bps respectively.
Fixed income market analysts expect a marginal uptick in domestic bond yields as markets reprice in anticipation of the monetary policy committee meeting in the new week.
A shift toward a rate-cut stance by the Committee could trigger yield adjustments across the curve, as investors recalibrate portfolios in response to changing monetary conditions, Cowry Asset Limited said.
Trading in the FGN bonds market is likely to remain cautious as investors await monetary policy committee meeting and monitor prevailing liquidity conditions.
Fixed income market analysts expect the outcome of the CBN policy committee meeting to be the key catalyst for yield movements in the bond secondary market, with policy guidance likely to set the tone for investor positioning. CBN to Sell Treasury Bills Midweek, Rates Projected to Taper
