Bond yields rise to 15.92% as investors turn cautious

The average yield on Federal Government of Nigeria bonds rose to 15.92 per cent last week, up 11 basis points week-on-week, as investors cut demand for fixed-income securities and bond prices fell. The increase came as investors remained cautious in the secondary bond market, leading to weaker demand across major maturities.

When demand for bonds falls, their prices typically decline, causing yields to rise.

Policy rate cut and inflation shape expectations

Analysts said the market is also adjusting to the recent 3.5 percentage-point cut in the Central Bank of Nigeria's benchmark interest rate. The cut is expected to put pressure on fixed-income yields in the coming months.

Meristem Securities said the lower policy rate would likely encourage investors to adjust their expectations for bond yields, particularly as the market enters the fourth quarter.

The decline in inflation is another factor shaping investor expectations. Headline inflation fell to 15.39 per cent in August 2026, increasing expectations that inflation could continue to moderate. Lower inflation can reduce the returns investors earn after accounting for rising prices, making investors more selective when buying bonds.

Mixed trading across maturities

Trading was mixed across different government bond maturities during the week. The yield on the five-year bond rose by 10 basis points to 16.25 per cent as sellers returned to the market.

In contrast, 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 remained unchanged at 16.10 per cent, 16.07 per cent and 14.66 per cent, respectively.

Despite the recent increase, bond yields remain significantly higher than they were at the beginning of the year. Different maturities are trading between 0.68 and 1.04 percentage points above their year-opening levels.

Weak demand may keep yields elevated

Cowry Asset Management said weak demand could continue to put pressure on bond prices and keep yields elevated in the short term. However, analysts said the relatively high yields could eventually attract investors back into the market, particularly if liquidity conditions improve. Investors could also reposition their portfolios across different maturities as expectations around interest rates and inflation become clearer.