FMDA Projects Lower Fixed Income Yields Amid N3trn Inflows

With over N3 trillion expected to flow into the financial system this week from maturing securities, analysts have projected a further moderation in fixed income yields, even as pressure on the naira persists despite improving foreign exchange liquidity conditions.

According to the latest market report by the Financial Markets Dealers Association (FMDA), an estimated N3.03 trillion will be injected into the banking system, largely driven by Open Market Operations (OMO) maturities valued at N2.25 trillion.

FMDA noted that liquidity in the financial system remained significantly elevated at N6.29 trillion in the previous week, supported by substantial inflows from maturing securities. “System liquidity remained elevated at N6.29 trillion, supported by sizeable inflows from maturing securities,” the report stated.

It added that, “Looking ahead, an estimated N3.03 trillion is expected to flow into the system this week, largely driven by OMO maturities, which account for about 74 per cent of projected inflows.”

The large liquidity injection is expected to sustain a strong investor appetite for fixed income instruments, particularly treasury bills and Federal Government of Nigeria (FGN) bonds, thereby exerting downward pressure on yields.

In the bond market, average FGN bond yield eased marginally to 16.20 per cent from 16.25 per cent in the preceding week, reflecting improved demand across most maturities and stable market conditions.

Treasury bill yields also declined on average to 17.45 per cent from 17.51 per cent, with the 12-month tenor recording the sharpest drop of 41 basis points to close at 18.61 per cent.

“FGN bond yields moderated slightly across most maturities, reflecting improved demand and relatively stable market conditions. Treasury bill yields showed mixed movements, with slight increases at the mid-tenors, while the average yield declined marginally to 17.45 per cent,” FMDA stated.

The report further noted that bond yields in global markets edged higher amid persistent inflation concerns and cautious monetary policy expectations. However, Nigeria’s long-term benchmark yield remained broadly stable despite upward movements across major developed and African markets, underscoring continued investor confidence in domestic fixed income assets.