TUE AUG 18 2026-theGBJournal| Federal government’s bond market rallied on Monday as strong demand at the Federal Government’s bond auction allowed the Debt Management Office (DMO) to sharply lower stop rates, even as Treasury bill yields moved higher.
The DMO offered N1.10 trillion of the January 2035, April 2037 and June 2038 bonds, attracting N1.73 trillion in bids, equivalent to a 1.6 times bid-to-offer ratio.
It ultimately allotted N805.16 billion, translating into a bid-to-cover ratio of 2.2 times.
Stop rates on the three securities fell sharply from the previous auction.
The January 2035 bond cleared at 17.15%, down 119 basis points, while the April 2037 and June 2038 bonds settled at 17.19% and 17.79%, respectively, representing declines of 116bps and 61bps.
The sizeable reduction in auction yields, coupled with demand that exceeded the amount offered, signals a stronger investor appetite for longer-dated Nigerian sovereign debt and gives the DMO scope to raise funding at lower marginal borrowing costs.
The strength in bonds contrasted with the Treasury bill market, where yields continued to rise.
The average Treasury bill yield increased 8bps to 18.6%, with selling pressure concentrated at the short and long ends of the curve.
Short-end average yields rose 24bps, driven by a 73bps increase in the 52-day-to-maturity bill, while long-end yields gained 4bps, led by a 39bps rise in the 234-day bill.
At the mid-section, average yields fell 3bps as demand for the 115-day bill pushed its yield down 12bps.
The OMO market also remained under pressure, with average yields rising 4bps to 21.2%.
Meanwhile, funding conditions in the banking system remained relatively benign.
The overnight lending rate fell 6bps to 22.2% in the absence of significant funding pressure.
The secondary FGN bond market extended its bullish tone, with average yields declining 4bps to 16.8%.
Yields fell across the benchmark curve, declining 6bps at the short end, 5bps at the mid-section and 3bps at the long end.
Demand was strongest for the February 2031, June 2033 and April 2037 bonds, whose yields declined by 20bps, 19bps and 22bps, respectively.
The contrasting moves across fixed-income instruments suggest that investors are becoming more constructive on longer-duration sovereign debt while remaining selective in short-term instruments.
The sharp cut in auction stop rates could also reset secondary-market expectations, particularly if demand for longer-dated bonds remains sustained.
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