FGN Bonds and T-Bills Deliver Peak Returns in Q1 2026 as 364-Day Treasury Bill Hits 18.47%
Nigeria’s fixed-income market recorded some of its strongest sovereign returns in recent years during the first quarter of 2026, before a gradual easing cycle began to reduce yields across Treasury bills and FGN bonds. The 364-day Treasury bill emerged as the standout performer, hitting a peak stop rate of 18.47%, the highest risk-free naira return within the period.
According to auction data from the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO), reviewed across January to March 2026, the surge in yields was largely driven by aggressive government borrowing to finance a record ₦23.85 trillion fiscal deficit. Tight monetary policy conditions and liquidity management by the CBN also contributed to elevated returns at the start of the quarter.
The data shows January as the peak month, February as the turning point, and March as a stabilisation phase. While the 91-day Treasury bill remained relatively stable around 15.80% to 15.95%, the 182-day bill peaked at 16.65% before easing slightly. Meanwhile, the 364-day bill began its decline from January highs as market expectations shifted following a 50 basis point rate cut by the Monetary Policy Committee in February.
On the bond side, demand remained extremely strong despite falling yields. The 18.50% FGN FEB 2031 bond recorded the highest yield-to-maturity at 17.62% in January, while total bond subscriptions hit ₦5.88 trillion against a ₦2.45 trillion offer. However, by March, bond yields had compressed significantly, falling into the 16.00%–16.64% range as investor appetite remained strong but pricing softened.
Overall, Q1 2026 highlighted the importance of timing in Nigeria’s fixed-income market. Investors who entered early in January locked in the highest returns before the easing cycle reduced yields across the curve. While returns remain attractive going into Q2 2026, market data suggests the peak of the current yield cycle has already passed, with gradual compression expected to continue.
source: nairametrics