Nigeria’s bond yields rose sharply on Monday, particularly the longer-term government debt, as investors are asking for higher returns after last week’s issuances at 17.5% rate for 345-day bill and slight increases in shorter-dated tenors.
The trading results of FMDQ for Monday, December 8, showed significant increases across Bonds and longer-dated bills traded on Monday at the secondary market, the first major yield increases since the Central Bank of Nigeria (CBN) started monetary policy easing in September this year.
At the December 3, 2025, auctions, the Debt Management Office (DMO) offered a 364-day bill at a stop rate of 17.5%, up from 16.04%, suggesting that costs of funds or borrowings are rising.
However, Treasury Bill (T-bill) rates, the short-term bills, remained relatively stable despite the sharp increases in rates across longer-dated instruments.
Bond Yields rise across the curve
Bond prices fell almost across the board, causing their yields, the returns investors get for holding them, to rise.
Several key Federal Government bonds recorded noticeable increases in yields:
- The March 17 and March 20, 2027, bonds rose to 16.27% each, up by 0.54% and 0.59% respectively.
- The Feb. 23 and March 20, 2028, bills jumped by 0.68% and 0.74% to 16.46% and 16.48% respectively.
- The April 17 and 26, 2029 bonds saw the biggest jumps, with its yield climbing to 16.70%, and 16.71% 0.9 percentage points higher.
- Other bonds maturing between 2031 and 2032 also recorded 0.60 and 0.34 percentage increases.
When yields go up, it means investors are selling off the bonds or demanding higher returns to buy them. This usually reflects tight liquidity in the financial system or rising expectations of future interest rates.
However, some traders linked the development to two major reasons: the increases in the December 3 auctions and the approaching yuletide season that puts most families on spending pressure.
“The latest auction set the tone. Recall that DMO and CBN allotted previous auctions at increased rates. Therefore, investors are asking for higher rates in line with the latest rates at previous auctions. It should be expected,” Mr. Blakey Ijezie, a chartered accountant and investments expert, told Nairametrics.
Breaking it down, he said, “In simple terms: the government will now have to pay more to borrow money, and existing bond prices fell because investors want higher returns before buying.”
T-bill Rates mostly edge lower
While bonds were under pressure, most Treasury Bills, especially the shorter-date ones, recorded slight drops in yields.
Examples include:
- 8-Jan-2026 T-bill yield dipped slightly to 15.82%.
- 5-Feb-2026 dropped to 16.01%.
- 9-Apr-2026 softened to 16.25%.
These decreases were small, between 0.02% and 0.04% but they show that buyers were a bit more interested in short-term instruments compared with longer-term ones.
However, longer-dated T-bills told a different story. Some saw sharp increases:
- The 3-Sep-2026 T-bill jumped to 18.86%, up 1.39 percentage points.
- The 5-Nov-2026 T-bill rose sharply to 20.19%, up 1.51 points.
- The 6-Aug-2026 line also moved higher by 1.09 percentage points to 18.32%.
This means investors are clearly demanding more returns for locking their money for a longer period, even within the T-bill market.
According to Mr. Tajudeen Olayinka, some investors are selling due to the Christmas season to realise returns on their investments and make unavoidable purchases during this period.
“What we are seeing is a normal seasonal trend. Investors, both individuals and institutions, are usually under sale pressure towards the end of the year. They all need cash and wouldn’t mind selling at discount, whether it is equities or fixed income assets,” the stockbroker told Nairametrics.
The backstory
At its 302nd meeting in September, the CBN had reduced Monetary Policy Rate (MPR) by 50 basis points, lowering it from 27.5 percent to 27 percent.
The MPC also adjusted the asymmetric corridor at that time to +250/-250 basis points, narrowing it from the previous +500/-100 range.
These actions marked the early signs of a cautious shift as inflation indicators showed mild improvement.
At its 303rd meeting in November, the apex bank also retained the MPR at 27%, maintaining its tight monetary stance as part of ongoing efforts to rein in inflation and stabilise the foreign exchange market.
The decision to maintain the MPR came at a time when businesses are facing high borrowing costs, but the CBN insists that monetary discipline is necessary to restore macroeconomic stability.
