Nigeria’s sovereign bond yield curve inverted in April as rising inflation eroded real returns across all maturities, according to the latest FMDQ Exchange data.
The spread between 3-month and 10-year government bond yields narrowed to -0.06 percentage points, down 4.43 percentage points from March. This inverted the yield curve, with shorter-dated yields exceeding longer tenors.
Driving the inversion was a continued surge in consumer price inflation, which accelerated to 33.69% year-over-year in April from 32.76% the prior month. With the highest bond yield at 20% for 10-year notes, real yields remained deeply negative across the curve.
T-bills with 6-12 month maturities saw the heaviest trading volume at 4.18 trillion naira, while the 5-10 year segment was most active in bonds at 1.05 trillion naira turnover.
Overall, fixed income market activity fell 30.87% from March to 8.33 trillion naira amid lower trading intensity. The decline coincided with reduced issuance, as the Debt Management Office sold just 1.31 trillion naira in T-bills, down 50.76% from the prior month.
However, FGN bond supply ticked up 2.95% to 626.81 billion naira, even as demand outstripped offered amounts by a ratio of nearly 450% for T-bills and 139% for bonds.
Money market rates also eased, with the average O/N rate down 10 bps to 29.2% and the OPR lending rate lower by 23 bps at 28.22% as system liquidity improved.
The report highlights mounting price pressures in Africa’s largest economy and the challenges facing policymakers in reining in inflation while supporting growth.
