Average bond yield contracts by three basis points despite mixed movements across the yield curve, while higher government borrowing could limit further declines.
Trading in Nigeria’s Federal Government of Nigeria (FGN) bond secondary market remained relatively subdued during the week, although renewed investor demand supported a marginally bullish performance across the market.
Average yields across fixed-income instruments declined by three basis points week-on-week to 16.3 per cent, reflecting increased demand for selected government securities.
However, performance across the benchmark yield curve was mixed, as yields at the short end expanded by nine basis points, largely due to selloffs in the March 2027 bond, whose yield increased by 36 basis points.
In contrast, yields at the mid and long ends of the curve contracted by four and six basis points, respectively.
The improvement at the mid and long segments was supported by demand for the June 2032 and June 2038 bonds, whose yields declined by 22 and 21 basis points, respectively.
The performance suggests that investors remained selective, favouring specific maturities while reducing exposure to some shorter-dated instruments.
Looking ahead, the anticipated increase in Federal Government borrowing is likely to sustain upward pressure on bond yields over the medium term, as additional debt issuance could increase the supply of government securities.
Nevertheless, the ongoing monetary easing cycle, sustained foreign portfolio investment inflows and continued disinflation are expected to moderate the pace of any potential yield increases.
