…DMO rejects bids, allots N334bn
By Chinwendu Obienyi
Despite demand of N516.15 billion, the Debt Management Office (DMO) allotted N334.53 billion at the Federal Government of Nigeria (FGN) bond auction held on Monday, rejecting part of investor bids, market data revealed on Tuesday.
The auction, which featured the reopening of the JAN-2035 and APR-2037 FGN bonds, had an offer size of N600 billion. However, total subscriptions fell short of the amount on offer, resulting in a bid-to-offer ratio of 0.9 times.
Investors submitted bids worth N516.15 billion across the two instruments, reflecting continued interest in long-dated government securities amid elevated yields. Nonetheless, the DMO accepted only N334.53 billion, translating to a bid-to-cover ratio of 1.5 times based on the final allotment.
The lower allotment suggests the debt office may have rejected bids it considered too expensive, opting to contain the government’s borrowing costs despite a relatively subdued auction.
According to the data gathered by Daily Sun, the JAN-2035 bond recorded a stop rate of 17.00 per cent, representing an increase of 41 basis points from the previous auction when the instrument was the on-the-run benchmark bond. The APR-2037 bond cleared at a stop rate of 17.04 per cent.
The rise in stop rates reflects investors’ demand for higher yields amid persistent inflationary pressures, tight liquidity conditions and uncertainty over the near-term direction of interest rates.
Analysts noted that while demand remained significant in nominal terms, subscriptions were insufficient to fully cover the amount offered, highlighting a cautious investor sentiment in the fixed-income market.
“The auction outcome indicates that investors are still seeking higher compensation for holding long-term government debt. The DMO appears to have exercised pricing discipline by rejecting bids that would have pushed borrowing costs higher”, they said.
The result comes as yields in the secondary bond market have remained elevated in recent weeks, driven by expectations that inflation risks could keep monetary policy restrictive for longer. Investors have therefore continued to demand attractive yields before committing funds to long-dated securities.
Despite the shortfall in demand relative to the offer size, traders said the auction outcome underscores the government’s ability to attract substantial investor interest in domestic debt instruments, supported by the sovereign credit profile and the relative safety of FGN securities.
Going forward, market attention is expected to focus on upcoming Treasury bill auctions, signals from the Central Bank of Nigeria’s Monetary Policy Committee, all of which could influence yield expectations and investor appetite in the domestic fixed-income market.
With the DMO maintaining a selective approach to bid acceptance, future auctions may continue to test the balance between investor yield expectations and the government’s objective of managing borrowing costs.
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