Nigeria’s bond market saw a sharp rise in yields on Monday, with longer-term government securities leading the surge. Investors are demanding higher returns following the Debt Management Office’s (DMO) recent December 3 auction, where a 364-day Treasury bill was offered at a stop rate of 17.5%, up from 16.04% in previous issuances. The move reflects rising borrowing costs and investor caution amid the festive season.
Trading data from FMDQ on Monday, December 8, showed notable increases across longer-dated bonds. For instance, March 2027 bonds climbed to 16.27%, while February and March 2028 bills jumped to 16.46% and 16.48%, respectively. The April 2029 bonds recorded the largest gains, with yields rising to 16.70% and 16.71%. These movements indicate investors are selling existing bonds or demanding higher returns, reflecting tight liquidity and expectations of future interest rate hikes.
While longer-term bonds surged, shorter-dated Treasury bills experienced marginal changes. Yields for T-bills maturing in early 2026 edged slightly lower, including the 8-Jan-2026 bill at 15.82% and the 5-Feb-2026 bill at 16.01%. However, longer-dated T-bills like the 5-Nov-2026 line jumped sharply to 20.19%, suggesting that investors are seeking higher returns for locking funds in instruments with extended maturities.
Market analysts attribute the yield increases to the recent DMO auctions and seasonal factors. Chartered accountant Blakey Ijezie explained that the government now faces higher borrowing costs, as investors demand greater returns in line with prior auctions. Similarly, stockbroker Tajudeen Olayinka noted that the yuletide period drives investors to sell off securities to raise cash for spending, adding temporary pressure on bond prices.
The surge in yields comes in the context of the Central Bank of Nigeria’s (CBN) ongoing monetary policy adjustments. Since September, the CBN lowered the Monetary Policy Rate (MPR) by 50 basis points to 27%, signaling cautious easing. In November, the apex bank retained the MPR at 27%, maintaining a tight stance to control inflation and stabilize foreign exchange. Analysts suggest that as borrowing costs remain high, bond yields could continue to fluctuate depending on liquidity conditions and investor sentiment.
source: Nairametrics