The Federal Government raised N1.222 trillion from its June 2026 bond auction after attracting total investor subscriptions of N1.41 trillion, underscoring sustained demand for long-term government securities even as borrowing costs continue to rise.
Data released by the Debt Management Office (DMO) on Monday showed that the government offered a total of N1.2 trillion across two re-opened instruments: the 22.60% FGN January 2035 bond and the 16.2499% FGN April 2037 bond, with N600 billion allotted to each issue.
Investors responded with strong demand, submitting bids worth N705.22 billion for the 2035 bond and N708.27 billion for the 2037 bond.
This pushed total subscriptions to N1.41 trillion, exceeding the amount offered by N213.49 billion.
Ultimately, the DMO allotted N600.90 billion to the 2035 bond and N621.00 billion to the 2037 bond, bringing total successful bids to N1.222 trillion.
The auction cleared at marginal rates of 18.34% for the 2035 bond and 18.35% for the 2037 bond, while coupon rates remained unchanged at 22.60% and 16.2499% respectively.
Strong Demand Across Tenor Segments
Both instruments were oversubscribed, with the 2035 bond exceeding its offer by N105.22 billion and the 2037 bond surpassing its target by N108.27 billion.
Investor participation also strengthened during the month, with total bids rising to 394 in June from 265 in May, while successful bids increased to 316 from 175.
The longer-dated 2037 bond attracted particularly strong interest, accounting for just over half of total subscriptions and receiving the highest allocation of N621 billion.
Despite the increased offer size, investor appetite remained strong, with demand sufficient to fully absorb the issuance and generate additional allotments.
Yields Rise as Borrowing Costs Increase
While demand remained robust, the auction reflected a clear rise in investor yield expectations.
The marginal rate on the 2035 bond climbed from 17.00% in May to 18.34% in June, representing an increase of 134 basis points.
Similarly, the stop rate on the 2037 bond rose from 17.04% to 18.35%, up 131 basis points month-on-month.
Bid ranges also widened significantly, with investors demanding yields between 16.00% and 22.60% for the 2035 bond and between 16.00% and 21.75% for the 2037 instrument.
The increase in marginal rates signals higher borrowing costs for the Federal Government as investors price in inflationary pressures and macroeconomic risks.
Market Activity Strengthens
Market data showed a sharp rise in activity during the month.
Total subscriptions jumped from N516.17 billion in May to N1.413 trillion in June, representing an increase of N897.32 billion or 173.8%.
Total allotments also rose from N614.51 billion to N1.222 trillion, a 98.8% increase, while the offer size doubled from N600 billion in May to N1.2 trillion in June.
In May, investors had subscribed N262.23 billion to the 2035 bond and N253.94 billion to the 2037 bond, alongside a N280 billion non-competitive bid.
By contrast, June’s auction recorded more than N700 billion in subscriptions for each instrument.
Investor Confidence Persists Despite Rising Yields
The strong outcome indicates continued investor confidence in Federal Government of Nigeria (FGN) bonds as attractive fixed-income instruments, even in a rising yield environment.
Analysts say domestic investors are increasingly pricing in inflation expectations and tighter monetary conditions, leading to a repricing cycle across the fixed-income market.
Data from the Financial Markets Dealers Association (FMDA) shows yields rising across most maturities, reflecting bearish sentiment and persistent inflation concerns.
Despite global trends showing easing yields in major bond markets, Nigeria’s domestic market continues to experience upward pressure as investors demand higher returns.
The sustained demand for government securities, however, provides the government with a stable source of long-term funding amid elevated financing requirements and fiscal pressures.
