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Average FGN bond yield rose 11 basis points week-on-week to 15.92 percent as demand weakened in the secondary market.
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Five-year bond yield climbed to 16.25 percent, while stronger demand pushed the 10-year yield down to 15.95 percent.
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Analysts expect the recent 3.5 percentage-point rate cut and easing inflation to reshape fixed-income investors’ yield expectations.
October 05, (THEWILL) – Yields on Nigerian government bonds rose last week as investors adopted a more cautious stance in the secondary market, weakening demand and putting downward pressure on bond prices.
The average yield on Federal Government of Nigeria (FGN) bonds increased by 11 basis points week-on-week to 15.92 percent, according to market analysts.
The increase reflected softer demand across major maturities as investors reassessed the outlook for interest rates and fixed-income returns following the recent monetary policy easing by the Central Bank of Nigeria (CBN).
Bond prices and yields generally move in opposite directions. As demand for existing bonds weakens, their prices fall, resulting in higher yields.
Rate Cut Reshapes Fixed-Income Outlook
Analysts said the market was also adjusting to the CBN’s recent 3.5 percentage-point reduction in its benchmark interest rate, which is expected to influence fixed-income yields in the coming months.
Meristem Securities said the lower policy rate would likely prompt investors to reassess their expectations for bond yields, particularly as the market enters the fourth quarter.
The rate adjustment has introduced a new dimension to fixed-income positioning, with investors weighing the prospect of further monetary easing against the relatively attractive yields currently available in the bond market.
Inflation trends are also influencing the outlook.
Headline inflation fell to 15.39 percent in August 2026, strengthening expectations that price pressures could continue to moderate.
While lower inflation can improve macroeconomic stability, it can also affect investors’ assessment of fixed-income returns. As inflation declines, investors may become more selective about the yields required to compensate for inflation and other market risks.
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Five-Year Yield Rises As 10-Year Attracts Demand
Trading was mixed across government bond maturities during the week, reflecting differing levels of investor demand.
The yield on the five-year bond rose by 10 basis points to 16.25 percent as selling pressure returned to the market.
In contrast, stronger demand for the 10-year bond pushed its yield down by six basis points to 15.95 percent.
Yields on the three-, seven- and 20-year bonds were unchanged at 16.10 per cent, 16.07 percent and 14.66 percent, respectively.
The divergent movement across maturities suggests that investors were not making a uniform exit from government securities but were instead adjusting positions based on their expectations for interest rates, inflation and returns across the yield curve.
Despite the latest weekly increase, bond yields remain significantly above their levels at the beginning of the year, with different maturities trading between 0.68 and 1.04 percentage points above their respective year-opening levels.
High Yields Could Draw Investors Back
Cowry Asset Management said weak demand could continue to weigh on bond prices and keep yields elevated in the short term.
However, analysts noted that relatively high yields could eventually attract investors back into the market, particularly if liquidity conditions improve.
The combination of elevated yields and expectations of easing inflation could become increasingly important for portfolio managers assessing the real returns available from government securities.
Investors may also continue to reposition across maturities as expectations around the direction of interest rates and inflation become clearer.
For now, the bond market remains caught between two competing forces: cautious demand following the shift towards lower policy rates and the attraction of yields that remain relatively high compared with the beginning of the year.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
