DMO to Open N1.2 Trillion FGN Bonds for Subscription
The Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), is scheduled to conduct a bond auction on Monday, offering a total of N1.20 trillion across three re-opened maturities.
The offer size is unchanged from June, according to a circular obtained from the authority, reinforcing the government’s elevated funding requirements amid persistent fiscal pressures.
The issuance will be evenly split, with N400 billion offered across the 22.60% FGN JAN 2035 (10-year), 16.25% FGN APR 2037 (20-year) and 15.45% FGN JUN 2038 (15-year) bonds.
In the June bond auction, the DMO reopened the 22.60% FGN JAN 2035 and 16.25% FGN APR 2037 bonds, maintaining the same maturities offered in the May auction.
The authority offered a total of N1.20 trillion across the two re-opened instruments, marking the largest bond issuance on record. This surpassed the N600 billion offered in May and the previous record high of N900.00bn issued in January.
The larger offer size suggests that, despite the visible front-loading of domestic borrowing in Q1:2026, the government’s elevated funding requirements have continued to drive sizeable bond issuances amid persistent fiscal pressures.
The issuance was evenly split, with N600.00 billion allocated to each of the 22.60% FGN JAN 2035 (10-year) and 16.25% FGN APR 2037 (20-year) bonds.
Demand was evenly distributed across both instruments, with the FGN JAN 2035 attracting N705.22 billion in subscriptions and the FGN APR 2037 receiving N708.27 billion, bringing total subscriptions to N1.41 trillion.
In a commentary note, Meristem Securities Limited said this represents the second-highest subscription level recorded this year, behind only the N2.70 trillion recorded in February, when investors rushed to lock in yields amid expectations of a declining interest-rate environment.
The DMO allotted N600.90 billion and N621 billion across the JAN 2035 and APR 2037 bonds, respectively, resulting in a total allotment of N1.22 trillion. The bid-to-cover ratio moderated to 1.16x from 1.30x in the previous auction.
Consequently, the bid-to-cover ratio moderated to 1.16x from 1.30x in the previous auction, indicating that demand remained robust while the amount allotted increased in tandem.
Stop rates edged higher across both maturities, with the FGN JAN 2035 clearing at 18.34% (+134bps from its May reopening of 17.00%) and the FGN APR 2037 at 18.35% (+131bps from 17.04% in May).
The increase in stop rates reflects investors’ demand for higher yields amid persistent inflation concerns, partly driven by higher oil prices during the period.
Meristem Securities Limited said this also shows the DMO’s willingness to accommodate higher borrowing costs to secure the substantial funding required, given the government’s elevated domestic financing needs and the significantly larger volume of bonds offered at the auction.
The secondary market also repriced higher following the auction, with the average bond yield rising by 69 bps to 17.64% as of 16 July, up from the previous auction date of 19 June. The sharpest upward repricing was recorded on the 21-Jun-38 (+229bps), 20-Mar-27 (+171bps), and 18-Mar-36 (+156bps) bonds.
The move higher in secondary market yields suggests that investors continued to adjust pricing to align with the higher primary market clearing rates while also factoring in expectations of sustained government borrowing and persistent inflationary pressures.
“We expect stop rates at the July bond auction to remain broadly stable relative to the last auction levels, albeit with a slight upward bias”, Meristem Securities Limited said.
Analysts said while June inflation moderated marginally, the decline was driven primarily by lower core inflation, with food inflation remaining elevated, suggesting underlying price pressures have yet to ease meaningfully.
In addition, Meristem Securities Limited said lingering geopolitical tensions continue to pose upside risks to global oil prices, which could sustain inflation expectations and keep investors cautious.
Analysts said DMO’s decision to maintain a sizeable N1.20 trillion offer reinforces the government’s elevated domestic funding requirements, requiring investors to absorb another large supply of bonds.Fixed Income Investors Lock in Yields Ahead of CBN Auction
