Yields on Federal Government of Nigeria (FGN) bonds advanced in the secondary market last week, driven by investor portfolio adjustments and renewed sell pressures following the release of the Q4 2025 bond issuance calendar.
Market data showed that benchmark bond yields now hover below 16%, remaining under the annual inflation rate of 18.02%. This yield-inflation gap highlights ongoing repricing activity among institutional investors.
Significant selloffs were recorded across the mid- and long-term segments of the curve, particularly on local bonds maturing in 2033 and 2049. The yield on the 2033 paper climbed by 11 basis points, while the 2049 maturity rose by 10 basis points. Similarly, the June 2033 bonds saw a 7-basis-point increase due to intensified sell pressure.
Investor sentiment shifted shortly after the Debt Management Office (DMO) unveiled its Q4 issuance plan, which showed an expanded offer range of ₦120 billion to ₦150 billion—up from ₦100 billion in the previous quarter. This development prompted investors to rebalance portfolios to align with the upcoming supply and pricing expectations.
According to analysts at Cowry Asset Management Limited, the initial selloff stemmed from reactions to the softer-than-expected inflation data for September, which came in at 18.02% year-on-year. The lower inflation reading triggered profit-taking and repricing across several bond maturities.
However, the tone of the fixed-income market turned positive midweek as bargain hunters took advantage of higher yields, particularly in the 2030s segment. Renewed demand drove moderate recovery, reflecting improved investor confidence in the medium-term outlook of the Nigerian debt market.
By the close of trading, the average yield on benchmark FGN bonds declined by one basis point to 15.97%, signifying a return to bullish sentiment after early-week selloffs. Analysts attribute this rebound to rising optimism over moderating inflation, fiscal stability, and expectations of future monetary policy easing.
Financial market experts predict that the positive momentum in both domestic and international debt markets will continue in the coming weeks as investors reallocate funds in response to improving macroeconomic indicators.
Disinflation remains a critical factor shaping bond pricing, with analysts projecting further yield compression as investor appetite for naira assets deepens and liquidity conditions stay robust.
Recent data from the National Bureau of Statistics (NBS) revealed that Nigeria’s headline inflation eased for the sixth consecutive month, dropping to 18.02% in September 2025 from 20.12% in August. The sustained decline, driven by broad-based reductions in food and core inflation components, has enhanced investor sentiment in the fixed-income space.
Market participants expect yields to remain pressured in the near term, especially on long-dated maturities, as investors continue to take advantage of the lower inflation outlook and potential rate cuts by the Central Bank of Nigeria (CBN).
In its latest outlook, Cowry Research noted that while the yield curve may remain inverted in the short term, a gradual normalization is likely as the spread between short- and long-term maturities narrows, creating new opportunities for investors positioning ahead of 2026.
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