Nigeria’s 10-year government bond yield rose by 46 basis points to 17.05% in the week ended October 16, 2026, even as benchmark yields in the United States, South Africa, Kenya and three other markets declined.
This is according to the Financial Markets Dealers Association (FMDA) weekly market report, which showed Nigeria recording the only yield increase among seven countries tracked during the period.
The upward pressure continued at the October 19 Federal Government bond auction, where the Debt Management Office (DMO) accepted higher stop rates while increasing its borrowing through competitive and non-competitive allotments.
Nigeria’s Bond Yield defies global decline:
Nigeria’s benchmark 10-year bond yield increased from 16.59% to 17.05%, representing a 46-basis-point rise during the review week. The movement contrasted with declines across all six other markets in FMDA’s comparison.
The United States recorded a 17-basis-point decline in its 10-year yield to 5.08%, while South Africa’s equivalent yield fell by 11 basis points to 8.86%.
- Kenya’s 10-year yield declined by six basis points to 12.53%.
- Japan’s benchmark yield fell by eight basis points to 2.94%.
- The United Kingdom recorded a four-basis-point decline to 5.40%.
- China’s 10-year yield also declined by four basis points to 1.64%.
- Nigeria’s 10-year yield consequently stood approximately 1,197 basis points above the US benchmark, reflecting the substantial difference in nominal borrowing rates.
- However, the yield gap does not represent a guaranteed excess return for investors because it excludes currency movements, inflation and credit risks.
- The divergence also occurred despite a sharp increase in domestic banking system liquidity.
According to FMDA, banking system liquidity rose by 69.39% to N6.28 trillion, supported by N2.41 trillion in maturing Open Market Operation bills. Average FGN bond yields increased by 32 basis points to 16.43%, while average Treasury bill yields rose by seven basis points to 18.23%.
DMO accepts higher Bond Rates:
The October 19 FGN bond auction provided further evidence of upward pressure on government borrowing costs. The DMO allotted N1.22 trillion through competitive bids, approximately 63.5% above the N748.64 billion allotted in September.
An additional N800 billion in non-competitive allotments increased the total amount allotted to N2.02 trillion.
- The September 2036 bond’s stop rate increased by 50 basis points to 17.29%.
- The June 2038 bond’s stop rate rose by 34 basis points to 17.19%.
- Total auction subscriptions increased by approximately 17% compared with N1.49 trillion recorded in September.
- The October auction formed part of a N5.75 trillion fourth-quarter bond issuance programme.
- The higher stop rates indicate that the DMO accepted increased borrowing costs to secure the October allotments.
The development followed similar pressure in the Treasury bill market, where the October 14 auction recorded substantial investor demand but limited allotments.
At that auction, the DMO allotted N220 billion from N982.21 billion in subscriptions for the one-year Treasury bill.
The one-year stop rate increased to 15.90% from 15.85%, representing its first increase since August. The two auctions therefore showed rising accepted rates across different segments of the Federal Government securities market.
Liquidity rises amid Bond supply:
The increase in government bond yields has implications for investors holding existing fixed-rate securities and those considering new purchases. When market yields rise, the prices of existing fixed-rate bonds generally fall, potentially creating valuation losses for investors marking their holdings to market.
- New investors, however, may benefit from higher available yields when purchasing government securities.
- FMDA reported a 69.39% increase in banking system liquidity to N6.28 trillion during the week ended October 16.
- The CBN recorded a N2.06 trillion primary-market repayment on October 20, providing an additional securities-related liquidity release.
- Banks subsequently recorded N5.46 trillion in activity at the CBN’s Standing Lending Facility window.
- The DMO’s fourth-quarter issuance programme includes planned bond auctions of N2 trillion each on November 16 and December 14.
- The latest liquidity movements come as the Federal Government continues to seek substantial funding from the domestic bond market.
However, increased banking system liquidity does not automatically translate into lower government borrowing costs, as the October auction demonstrated. The next two scheduled auctions will provide further indications of whether DMO is willing to borrow at prevailing higher yields or moderate the rates.