HIGH BOND YIELDS TO PERSIST UNTIL Q4 AMID INFLATION

High bond yields are expected to remain elevated until the fourth quarter of 2026 due to persistent inflationary pressures and tight monetary policy, according to leading financial analysts.

In a market report released on Friday, analysts at a prominent investment firm projected that yields on government bonds and other fixed-income securities will stay high as the Central Bank of Nigeria (CBN) maintains its aggressive stance against inflation.

“Inflation remains a major concern. Until we see a clear and sustained decline in price levels, the CBN is unlikely to ease monetary policy. This will keep bond yields elevated through the third quarter,” the report stated.

The analysts noted that the current high-yield environment has made bonds attractive to investors seeking better returns, but it has also increased the cost of borrowing for the government and the private sector. They advised investors to remain cautious and consider the potential impact of future policy changes.

The CBN has been using high interest rates as a primary tool to combat inflation, which has remained in double digits for several months. While some economists have called for a more balanced approach that includes fiscal measures, the apex bank has maintained that monetary tightening is necessary to anchor expectations.

Market participants expect bond yields to begin moderating in the fourth quarter if inflation trends downward and the government makes progress on fiscal consolidation. However, any resurgence in inflationary pressures or external shocks could prolong the high-yield environment.

The persistence of high bond yields is also affecting corporate bond issuance and the overall cost of capital in the economy. Businesses have expressed concerns about the impact on investment and expansion plans.

As the year progresses, analysts will be closely monitoring inflation data, CBN policy decisions, and government fiscal performance to gauge the likely trajectory of bond yields in the second half of 2026.