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By Chinwendu Obienyi
Investor appetite for Federal Government of Nigeria (FGN) securities remained relatively strong at the latest bond auction conducted by the Debt Management Office (DMO), despite a further rise in borrowing costs as stop rates moved above the 18 per cent mark.
At the auction, the DMO reopened the January 2035 and April 2037 FGN bonds, offering a combined N1.20 trillion to investors. Total subscriptions reached N1.41 trillion, representing a bid-to-offer ratio of 1.2 times, as market participants continued to show interest in government debt instruments amid prevailing yield levels.
Following the strong demand, the debt office allotted N1.22 trillion across the two reopened bonds, slightly exceeding the amount offered. The final allotment reflected a bid-to-cover ratio of 1.2 times, indicating that investor demand was sufficient to absorb the supply.
However, the auction results showed that investors demanded higher returns, with stop rates on both instruments rising significantly compared with the previous auction.
The stop rate on the January 2035 bond increased by 134 basis points to 18.34 per cent, while the April 2037 bond’s stop rate expanded by 131 basis points to 18.35 per cent. Both securities were the on-the-run bonds in the previous month’s auction.
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According to analysts, the upward movement in yields drove continued repricing of fixed-income assets as investors adjust expectations around inflation, monetary policy direction, liquidity conditions, and the government’s financing needs.
The increase in stop rates suggests that investors are seeking greater compensation to hold longer-dated government securities amid elevated macroeconomic uncertainties. Higher yields also reflect the broader trend in the fixed-income market, where investors have been demanding improved returns across treasury bills and bonds.
Despite the higher yields, the auction outcome highlights sustained demand for sovereign instruments, as investors continue to favour FGN securities for their relatively lower risk profile and attractive returns compared with other asset classes.
The result also provides insight into the government’s borrowing environment, with increased yields potentially raising the cost of domestic financing.
As the fiscal authorities continue to rely on the domestic market to fund budget requirements, the balance between investor demand and borrowing costs remains a key focus for policymakers.
Investors will continue to monitor future auctions for signals on liquidity conditions, interest rate expectations, and investor confidence in Nigeria’s debt market.
