Investor Optimism To Boost DMO’s N300bn Bond Auction

Investor sentiment is expected to remain strong as the Debt Management Office (DMO) reopens two Federal Government of Nigeria (FGN) bonds on Monday, aiming to raise N300 billion.

The auction will offer re-issues of the 19.30 per cent FGN APR 2029 and the 19.89 FGN MAY 2033 instruments, as outlined in the May 2025 bond offer circular.

The auction is coming at a time when Nigeria’s local bond market has shown signs of bullish momentum, particularly at the mid- and long-end of the yield curve. Last week, the Nigerian sovereign bonds market ended on a bullish note, with buying interest at the mid and long ends of the yield curve.

Data indicated that yields declined by three basis points (bps) and 1bp week-on-week (w/w) at the mid- and long-tenor segments respectively, nudging the average yield down to 19.0 per cent. The short end of the curve remained stable, suggesting a focused appetite for duration among investors.

This reflects a cautious optimism among investors amid supportive macroeconomic signals, despite tight system liquidity.  According to analysts at Cordros Research, the outcome of the auction could set the tone for yield direction, “especially from local institutional players seeking to lock in attractive real returns. In the secondary market, yield direction will hinge on auction results and system liquidity trend.”

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At the money market end, system liquidity closed last week at a deficit position of N119.9 billion, indicating a decrease of 42 per cent week on week. According to analysts, the liquidity strain was primarily due to substantial outflow via the standing deposit facility which took out N2.5 trillion which outweighed the standing lending facility of N949.2 billion.

Meanwhile, the Overnight Policy Rate (OPR) OPR and overnight (OVN) rates closed last week lower at 26.4 per cent and 26.9 per cent respectively from 26.5 per cent and 27.0 per cent in the previous week.  At the primary market auction (PMA), the CBN offered T-bills worth N500.0bn across the 91-, 182 and 364-day tenors.

Demand was robust at the auction as bid-to-offer ratio printed at 2.3x.

Most of the demand was seen at the long tenor notes where the N350 billion offer saw a N1.2 trillion subscription and sale of N615.8 billion, while a short offer of N50 billion saw a subscription of N72.6 billion and an eventual sale of N71.7 billion.

At the secondary T-bills market, the bull was active as average yield declined 0.6ppt w/w to 20.8 per cent, supported by buy interests on the short, mid, and long end of the curve with yield decreases of 0.4, 1.3, and 0.1ppt w/w to 18.4 per cent, 20.1 per cent and 23.8 per cent respectively.