DMO Cuts Bond Rates Amidst Soaring Demand, Rejects Excess Bids

The Debt Management Office (DMO) has slashed interest rates on Federal Government bonds maturing in April 2029, responding to overwhelming investor appetite during the latest primary market auction. Despite strong demand, the agency maintained a strict allotment strategy, accepting only what was initially offered.

The DMO had floated ₦100 billion worth of bonds — comprising ₦50 billion in reopenings and another ₦50 billion in new issuances. However, investor subscriptions soared to ₦602.86 billion, six times the total offer, signaling a robust appetite for naira-denominated assets.

AAG Capital Limited, in its post-auction analysis, noted that the bid-to-cover ratio for newly issued bonds reached a remarkable 11.2x, clearing at a marginally lower stop rate of 17.95%.

In the reopened April 2029 bond tranche, the DMO recorded subscriptions totaling ₦41.49 billion, under the ₦50 billion target. The agency responded by reducing the spot rate on the 5-year bond by 123 basis points, bringing it down to 17.75%.

For the newly issued 7-year bonds, bids came in at a staggering ₦561.17 billion. The DMO eventually allotted ₦98.95 billion at a clearing rate of 17.95%, consistent with the recent downward trend in yields amid aggressive positioning by institutional investors.

Meanwhile, in the secondary market, bond trading remained relatively subdued post-auction. Traders exhibited selective interest in the 2029, 2031, 2033, and 2053 maturities. Particularly, the May 2033 bonds saw light activity with yields ranging between 18.45% and 18.60%. The broader bond market closed with average yields falling by 14 basis points to settle at 18.10%.

Market watchers interpret the strong demand and falling yield environment as a continued vote of confidence in government securities, despite macroeconomic headwinds. However, the DMO’s decision to reject excess bids underscores its strategy to control borrowing costs while maintaining credibility with investors.