…DMO records oversubscription on 7-year, 10-year bonds
The Federal Government’s newly issued 10-year bond (JAN-2035) has recorded a historic yield and coupon rate of 22.60%, driving strong investor interest and an oversubscription of ₦368.1 billion, significantly exceeding the ₦200 billion initially offered by the Debt Management Office (DMO).
The bond, first auctioned on Monday, January 27, marks the highest yield ever recorded for FGN bonds, positioning it as a preferred investment option in the fixed-income market.
Reacting to the development, Atiko Audu, Chief Investment Officer at ARM Pension Managers, advised investors to take advantage of the 200-basis-point yield difference between the March-2035 and Jan-2035 FGN bonds.
“Sell your holdings of March-2035 at 20.5% and buy Jan-2035 at 22.6%. The latter has a shorter tenor but offers significantly higher returns,” Audu recommended.
The DMO also re-opened its five-year (APR-2029) and seven-year (FEB-2031) bonds at Monday’s primary auction. The Feb-2031 bond made history as the first Nigerian bond issuance to cross the ₦2 trillion mark, underscoring the sustained appetite for longer-term instruments amid macroeconomic uncertainties.
Fixed-income analysts attribute the growing demand for long-term FGN bonds to investors’ anticipation of shifts in inflation, monetary policy rates (MPR), and other macroeconomic dynamics.
“Investors are strategically locking in long-term instruments to hedge against potential economic changes. The new 10-year bond, with its record-high yield, is attracting significant attention,” noted Matilda Adefalujo, Fixed-Income Analyst at Meristem Securities.
As of Wednesday, the DMO had issued ₦2.1 trillion worth of the Feb-2031 bond, with its yield surging to 22.50% from 18.50% at the time of its initial issuance. The DMO also exceeded its planned auction volume, selling ₦606.46 billion against the ₦450 billion offered.
The outcome of the first FGN bond auction of 2025 aligns with expert projections from CardinalStone, which previously advised investors to prioritize long-duration bonds.
“We expect yields to remain stable in H1 2025 before moderating in H2 2025. Investors should favour long-term instruments due to their price appreciation potential and better protection against reinvestment risks,” CardinalStone analysts stated in their 2025 market outlook.
Meanwhile, the Federal Government plans to raise up to ₦1.8 trillion from the bond market in Q1 2025, as part of efforts to finance its fiscal objectives, according to the DMO.
The strong investor appetite and record-breaking bond yields signal a heightened confidence in government securities, reinforcing the debt market’s role in stabilizing Nigeria’s economic landscape.