The Federal Government of Nigeria (FGN) bond market sustained its bearish momentum last week as average yields advanced by 8 basis points week-on-week (w/w) to close at 16.70 percent.
The weakness was broad-based across the curve with short-, mid-, and long-dated maturities posting modest increases.
Mid-dated instruments led the movement, rising 10bps to 16.73 percent, while short-term bonds added 6bps to 17.07 percent. Long-dated maturities also climbed 6bps to 15.88 percent.
The bearish performance was further mirrored in Nigeria’s Eurobond curve, where average yields widened by 16bps w/w to 8.12 percent from 7.96 percent in the prior week.
The 2032 (+24bps to 8.28%) and 2033 (+21bps to 8.60%) papers accounted for much of the upward pressure, underscoring persistent risk-off positioning by offshore investors.
Market analysts attributed the broad weakness in fixed income securities to tight liquidity conditions triggered by sizeable OMO auctions.
The Central Bank of Nigeria (CBN) last week offered ₦600.00 billion across short- and medium-tenor bills with allotments exceeding ₦894.94 billion as stop rates surged to 25.99 percent.
The exercise absorbed significant liquidity from the system, heightening selling pressure in secondary markets.
System liquidity, which opened the week at ₦1.02 trillion, tightened sharply to -₦609.43 billion by Friday. Utilisation of the Standing Lending Facility (SLF) rose to ₦821.50 billion, compared with ₦179.08 billion in the previous week, indicating increased borrowing by commercial banks to manage shortfalls.
Despite the bearish tone, analysts expect demand at the primary bond auction to be supported by coupon inflows estimated at ₦103 billion this week, in addition to ₦300 billion in OMO maturities.
However, with the CBN maintaining a tightening bias, further OMO issuance could offset the liquidity boost, sustaining upward pressure on yields in the near term.
The bond market is therefore expected to trade cautiously this week, with investors positioning selectively across maturities in response to inflationary pressures, elevated policy rates, and CBN’s liquidity management strategy.