DMO opens N1.1trn FGN bond offer as yields rise

The Debt Management Office (DMO) of Nigeria is preparing to launch its latest Federal Government of Nigeria (FGN) bond auction on Monday, seeking N1.10 trillion across three reopened securities as domestic fixed-income markets grapple with rising yields. The auction will encompass N250 billion in 10-year bonds maturing in January 2035, N100 billion in 20-year bonds maturing in April 2037, and the largest portion, N750 billion in 15-year bonds maturing in June 2038.

The 15-year security accounts for 68.2% of the total offer, followed by the 10-year (22.7%) and 20-year (9.1%) bonds. The auction emerges amid cautious investor sentiment in the government bond market, with recent secondary-market trading showing mostly bearish trends and weak demand, leading to higher yields. The average yield on Nigerian government bonds has risen by 13 basis points week-on-week to 17.13%, reflecting the challenges faced by fixed-income assets as investors reevaluate returns and assess inflation and interest rate outlooks.

This auction is particularly significant as the securities being reopened are established benchmark instruments. In the July auction, these same bonds attracted a combined N1.74 trillion against N1.2 trillion offered, ultimately allocating N929.3 billion to the market with rates of 18.34%, 18.35%, and 18.40% for the respective bonds.

The strong subscription levels in July suggest ongoing investor interest in government securities, despite the higher yields indicating their demand for attractive returns amidst market and inflation risks. The concentration of the current offer in the 15-year bond signifies a valuable signal of investor appetite for long-term government borrowing.

The DMO's provisional third-quarter issuance calendar reveals plans for further reopenings of the January 2035 and June 2038 bonds, underscoring their importance in Nigeria's domestic borrowing strategy.