Nigerian bond yields climb 12bps on pre-inflation data caution

Yields on Nigerian government bonds rose by 12 basis points to 16.5 per cent last week as investors pared positions in naira assets ahead of fresh inflation data.

The sell-off was driven by expectations that price growth will ease further following the rebasing of the consumer price index, as well as repositioning after a stronger-than-expected result in the Central Bank of Nigeria’s (CBN) OMO auction.

Short-tenor yields jumped 24bps, while the mid-segment gained 2bps, led by steep rises in the MAR-2027 (+33bps) and APR-2032 (+46bps) instruments. The long end of the curve held steady.

Early in the week, heavy selling hit short- to mid-dated papers such as the FGN 2029, FGN 2032, and FGN 2034. Midweek, attention shifted to the CBN’s liquidity mop-up, totalling ₦2.12 trillion in OMO bills and N173.25 billion in Treasury bills, prompting selective buying in mid-tenors.

AIICO Capital noted renewed interest in certain maturities, with the FGN 2035s seeing yields fall by 29bps. Still, by week’s end, trading was muted, marked by mild short-end sell-offs and modest mid-tenor repricing.

Cordros Capital and AIICO Capital project that yields could moderate over the medium term on the back of a dovish policy outlook and favourable demand-supply dynamics. However, they warned that a sustained decline in yields could spur foreign portfolio outflows as investors seek higher offshore returns, potentially pressuring the naira.

The week closed with the market slightly weaker overall, reflecting cautious positioning amid tight system liquidity and limited primary market triggers, with sporadic demand expected at attractive points on the curve.