FMDQ Debt Market Hits N99.3tn as T-Bills, Bond Yields Ease on Improved Liquidity

Festus Akanbi with agency report

The Nigerian fixed income market extended its quiet rally on February 5, 2026, with Treasury bills and federal government bond yields declining across most maturities, pushing the total size of the FMDQ debt market to N99.30 trillion.

Data from the FMDQ Securities Exchange indicated that easing system liquidity and reduced dependence on aggressive short-term borrowing contributed to yield compression, even as the Central Bank of Nigeria (CBN) maintained a tight monetary policy stance.

The softer yields suggest a gradual moderation in government borrowing costs, driven more by market dynamics than by any shift in policy direction.

Trading activity reflected steady and resilient demand for government securities.

Investors positioned across the short, mid, and long ends of the curve, encouraged by liquidity inflows from maturing instruments that outweighed the dampening effect of elevated policy rates.

The result was a broad-based decline in yields across both Nigerian Treasury Bills (NTBs) and sovereign bonds.

According to FMDQ data, the sharpest yield drops were recorded at the longer end of the NTB curve and around the belly of the bond curve, suggesting growing investor confidence in extending duration.

Treasury bills maturing between October and December 2026 posted some of the most notable declines during the session, while FGN bonds with maturities between 2027 and 2035 also closed lower on stronger demand.

By contrast, ultra-long-dated bonds beyond 2040 were largely unchanged, reflecting lingering investor caution around long-term inflation risks and fiscal sustainability.

Still, overall market turnover underscored a sustained appetite for government paper, even with policy rates at historically elevated levels.

Benchmark yields closed lower across most tenors, reinforcing the bullish tone in the fixed income space. Short- and mid-dated instruments attracted the strongest bids, in line with investors’ preference for managing duration risk while locking in attractive returns.

On the Treasury bills side, benchmark yields for March to June 2026 maturities settled between 15.55 per cent and 16.65 per cent.

Bills maturing between July and September 2026 traded in the 16.29 per cent to 16.74 per cent range, while October to December 2026 maturities compressed further to between 16.05 per cent and 16.20 per cent. The January 2027 NTB closed around 16.05 per cent.

In the bond market, short-term FGN bonds maturing between 2027 and 2029 traded at around 16.04-16.11 per cent. Mid-tenor bonds due between 2031 and 2036 closed in a wider range of approximately 16.25 per cent to 16.88 per cent, while long-dated bonds from 2037 to 2053 traded between about 14.93 per cent and 16.91 per cent.

The distribution points to a flatter curve around the mid-section, as investors continued to favour maturities that balance yield, liquidity, and risk.

Money market indicators supported the positive sentiment. Interbank rates eased, signalling improved liquidity conditions within the banking system.

The overnight (O/N) rate moderated to 22.80 per cent, while the Open Repo Rate (OPR) closed at 22.50 per cent. The softening was largely attributed to liquidity inflows from maturing CBN Open Market Operations bills and other primary market instruments.

Meanwhile, FGN bond futures prices remained firm across both the two-year and 10-year contracts, suggesting expectations of near-term yield stability.