The Debt Management Office’s (DMO) second monthly bond auction of the year which was held this week Monday, was even more successful than the first. In line with its higher fundraising target for the year, the agency offered NGN360bn worth of FGN paper with maturities ranging from 5 to 26 years. It ended up raising NGN771bn, slightly over 2x the amount on offer. Total subscriptions amounted to NGN993bn, implying a bid-to-cover ratio of 1.3x. Demand was strong across most maturities as reflected by the total sales-to-offer ratio of 2.1x. However, the FGN 2032’s saw considerably weaker demand as illustrated by its sales-to-offer ratio of 0.6x.

The DMO has been offering the Apr '32s since last year. As such, a reasonable explanation for the weaker demand for maturity is its higher supply relative to other maturities offered.

While the yield for the Feb ’28 declined by 1bps to 13.99bps relative to the last auction, that for the Apr ’32 was unchanged at 14.9%. The yields for the Apr ’37 and Apr’49 increased by 10bps to 15.9% and 16.0% respectively.

Compared with the secondary market, yields were generally higher, by around 60bps and 10bps for the Apr ’32s and Apr ‘37s. The Feb ‘28s and Apr ’49 had more modest yield increases of 1bps apiece relative to the secondary market.

The substantial market liquidity over the last few months has been a significant contributor to the enormous success experienced by the DMO so far this year.

Thanks to the strong start to the year, the DMO is in a relatively better position than we had anticipated. The agency has successfully sold NGN1.4trn worth of bonds this year, c.206% more than it did in the comparable period of 2022.

Looking ahead, we expect market yields to remain elevated because of several factors including the CBN's contractionary monetary policy stance and the sizable supply of FGN paper amongst others.