WED AUG 27 2025-theGBJournal| The Debt Management Office held its monthly auction of FGN Bonds on Monday (25th Aug ’25).
It offered N200.00bn (vs. N80.00bn at the last auction) through the new issuance of the 17.95% FGN AUG 2030 (5-year) and the reopening of the 17.95% FGN JUN 2032 (7-year) instruments.
Total subscription stood at N268.17bn (vs. N300.67bn previously), resulting in a bid-to-offer ratio of 1.34x (vs. 3.76x previously).
The DMO allotted N136.17 billion reflecting a bid-to-cover ratio of 1.97x (vs. 1.62x previously).
The bids were allotted at the marginal rates of 17.95% and 18.00% (vs. 15.90% previously) respectively.
The strong demand at the auction was supported by improved system liquidity (N739.10bn as of 26th Aug ‘25), boosted by FAAC inflows and T-bill maturities. Domestic institutional investors remain the core participants at the auction, particularly Pension Fund Administrators (PFA)s.
According to the National Pension Commission (PENCOM), FGN bonds held by PFAs as of June increased by 18.22% y/y to N14.5trn vs N12.22trn in the corresponding period of 2024.
The PENCOM report shows that FGN bonds accounted for 58.66% oftotal assets under management (AUM) in Jun ’25.
Analysts at Coronation Research commenting on the trend said they observed a reversal in the downward pressure on yield, as the 7-year marginal rate advanced by 210 bps to 18.00% pa from 15.90% pa. at the last auction.
”This reflects the bearish sentiment from the secondary market, as the marginal rates were effectively in line with the secondary yields.
This could be a reaction to a shift in market sentiment from almost certainty that the Monetary Policy Committee will start reducing the Monetary Policy Rate in their September meeting to a real possibility that they will hold rates where they are,” Coronation Research said.
The FGN bond secondary market bearish sentiments persisted over the past month, as average yields edged higher 49 bps to 16.70% pa. from 16.21% pa. The bearish tone was broad-based, with yields rising across the yield curve.
The midpoint recorded the largest rise, up 64 bps to 16.74% pa, while short and long-term yields expanded by 46 bps and 28 bps to close at 17.07% pa and 15.88% pa, separately.
The observed selloffs reflect the response of investors to the upward revision in the FGN Bond supply calendar, which signals increased borrowing in future issuances.
Year-to-date, the FGN has raised approximately N12.65trn through Treasury bills and FGN Bond issuances.
At this pace, the DMO remains broadly on track to meet and potentially exceed its 2025 domestic borrowing target of N13.08 trillion if supply continues at the current trajectory.
Beyond the domestic market, there is the prospect of a Eurobond issuance in Q3, beginning of Q4 2025 under the Medium-Term Debt Strategy, subject to external market conditions.
We expect upward pressure on yields in the near term as liquidity conditions tighten on the back of OMO issuances.
Meanwhile, the Treasury bond secondary market traded on a calm note Wednesday with a bearish undertone as the average yield expanded by 1bp to 16.6%.
Across the benchmark curve, the average yield expanded at the short (+4bps) end following the selloff of the APR -2029 (+19bps) bond but closed flat at the mid and long segments.
The T-bills secondary market traded with bearish sentiments as the average yield expanded by 13bps to 18.7%.
Across the curve, the average yield declined at the short (-1bp) and mid (-1bp) segments due to interest in the 71DTM (-1bp) and 176DTM (-1bp) bills, respectively, but advanced at the long (+30bps) end following the selloff of the 344DTM (+162bps) bill. Similarly, the average yield expanded by 4bps to 25.5% in the OMO segment.
The overnight lending rate contracted by 8bps to 26.9% in the absence of any significant inflows into the system.
X-@theGBJournal|Facebook-the Government and Business Journal|email:gbj@govbusinessjournal.com|govandbusinessj@gmail.com
