FGN bonds and T-bills with highest returns sold in Q1 2026

Nigeria’s fixed-income market delivered some of its most attractive sovereign yields in recent memory during the first quarter of 2026 before a gradual but decisive easing cycle began to compress returns across the curve.

This is according to a Nairametrics review of primary market auction data from the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) covering January through March 2026.

The high yields were driven by aggressive domestic borrowing by the DMO to plug the Federal Government’s record N23.85 trillion fiscal deficit, combined with the CBN’s tight liquidity management strategy to rein in inflation.

Investors who moved early, particularly at the January auctions, locked in the quarter’s best returns before the CBN’s rate-cut cycle began to bite.

What the data is saying

Auction results from eight CBN Treasury Bill Primary Market Auctions (PMAs) and three DMO FGN Bond auctions in Q1 2026 show a clear pattern: January was the peak, February marked the turn, and March settled into a new, lower range.

• The 364-day T-bill posted its highest stop rate of the quarter at 18.47% on January 7, the single best risk-free naira return recorded across any instrument in Q1 2026.
• The 91-day bill held the most stable trajectory, swinging narrowly between 15.80% and 15.95% across all eight auctions, reflecting anchored short-end expectations.
• The 182-day bill peaked at 16.65% across January and February before softening to 16.42% by the March 25 close.
• On the bond curve, the 18.50% FGN FEB 2031 led the quarter with the highest yield-to-maturity stop rate of 17.62% at the January 26 DMO auction, against total demand of N2.25 trillion across three instruments.
• The 19.00% FGN FEB 2034 posted the sharpest intra-quarter compression — its stop rate collapsed by 200 basis points between January (17.50%) and February (15.50%), the steepest single-auction yield drop of the period.

Total FGN bond subscriptions in Q1 2026 hit N5.88 trillion, against a combined offer of N2.45 trillion — a clear signal of overwhelming investor demand for sovereign paper at prevailing yields.

More insights

The January 7 CBN auction set the tone for the entire quarter. Stop rates surged across all three T-bill tenors — the 91-day at 15.80%, the 182-day at 16.50%, and the 364-day at a striking 18.47% — as the government signalled its willingness to pay a premium to attract capital in the face of a record fiscal financing need.

• The January 21 auction maintained the momentum as the 91-day bill edged up to 15.84%
• The 182-day climbed to 16.65%, while the 364-day slipped marginally to 18.36%.
• Subscriptions on the one-year paper alone hit N3.345 trillion against an N800 billion offer, underscoring the depth of institutional appetite.

The inflection came in February. The CBN’s Monetary Policy Committee (MPC) cut the Monetary Policy Rate (MPR) by 50 basis points to 26.50% on February 24 — the first reduction in the current cycle — and the market repriced quickly.

• At the February 4 NTB auction, the 364-day stop rate had already dropped to 16.99%, a fall of 148 basis points from the January 7 peak, even before the formal MPC decision.
• By February 18, it slid further to 15.90%, as the CBN allotted a massive N1.71 trillion on the one-year paper against subscriptions of N4.075 trillion — the largest 364-day allotment of the quarter.
• March brought stabilisation at the short end. The 91-day bill locked in at 15.95% from March 4 through March 25 — four consecutive auctions without movement — reflecting a settled floor for short-tenor pricing.
• The 364-day bill recovered partially to 16.73% at the March 4 auction, before easing to 16.43% at the quarter’s final PMA on March 25, down 204 basis points from its January 7 high.
• Even so, investor demand showed no fatigue: the March 25 one-year bill attracted N2.726 trillion in subscriptions against a N200 billion offer — a subscription-to-offer ratio of 13.6x.
• On the bond side, the DMO ran three monthly auctions.
• February’s bond auction was particularly revealing: total subscriptions surged to N2.70 trillion, yet the DMO allotted only N524.28 billion.
• By March, bond stop rates had settled into a 16.00%–16.64% band, 100 to 160 basis points below their January peaks.

Investors who participated in the January 7 one-year T-bill locked in the highest risk-free naira yield available at any primary market auction in Q1 2026. No subsequent T-bill auction came close.

The FGN FEB 2031 delivered the highest bond yield-to-maturity of the quarter. For long-duration investors — particularly Pension Fund Administrators constrained by regulation to hold sovereign instruments. This paper represented the optimal combination of tenor, safety, and yield capture before the easing cycle eroded returns across the curve.

What You Should Know

Four key factors made Q1 2026 a landmark yield quarter:

• Government’s record N23.85 trillion deficit borrowing need, later raised to N29.20 trillion;
• The pre-cut rate positioning by sophisticated investors who front-loaded demand into January;
• The liquidity glut that sustained fixed-income assets demand despite compressing yield; and
• The volume of PFA flows after PenCom review, which kept auction subscription ratios elevated even as rates fell.
• The Q1 2026 data delivers one unambiguous lesson for fixed income investors: in a rate-cut cycle, timing is everything.
• Investors who entered at the January 7 T-bill auction captured best yield on the 364-day instrument.
• On the bond side, January’s stop rates of 17.50%–17.62% have not been matched in any subsequent auction, with March clearing 100–160 basis points lower and April continuing the downward drift.

For investors entering Nigeria’s fixed income market in Q2 2026, the environment remains historically attractive — but the peak of this yield cycle is over.