Investor appetite for Federal Government bonds weakened in May 2026 as total subscriptions dropped by 45.6 per cent month-on-month, despite rising yields at the auction.
Data released by the Debt Management Office showed that total market subscriptions fell to N516.17bn in May from N947.99bn recorded in April.
At the May 18 auction, the DMO offered N300bn each for the reopened 22.60 per cent FGN January 2035 bond and the 16.2499 per cent FGN April 2037 bond. The 10-year paper attracted subscriptions worth N262.23bn, while the 20-year bond recorded N253.94bn in bids.
This represented a significant decline from April, when investors submitted a combined N947.99bn in subscriptions across the 5-year, 7-year, and 10-year instruments auctioned by the DMO.
The April auction recorded subscriptions of N181.94bn for the 5-year bond, N167.04bn for the 7-year paper, and N599.02bn for the 10-year instrument.
Despite weaker demand, the government raised rates at the auction. The 10-year bond cleared at a marginal rate of 17.00 per cent in May, higher than the 16.59 per cent recorded on the same tenor in April, while the 20-year paper cleared at 17.04 per cent.
The April auction had recorded marginal rates of 16.30 per cent for the 5-year bond, 16.50 per cent for the 7-year instrument, and 16.59 per cent for the 10-year paper.
Analysis of the auction results showed that investor demand for the 10-year bond weakened considerably in May. Subscriptions for the instrument fell by 56.2 per cent, from N599.02bn in April to N262.23bn in May.
However, despite lower subscriptions, total allotment rose sharply. The DMO allotted N614.51bn in May, more than double the N276.79bn allotted in April.
The increase was largely driven by a N280bn non-competitive bid on the 20-year bond. The DMO allotted N476.84bn on the 20-year instrument and N137.67bn on the 10-year paper.
A non-competitive bid is a type of bond auction bid in which the investor agrees to accept the yield or interest rate determined at the auction rather than specifying a preferred rate.
It guarantees allocation of the requested securities, unlike competitive bids, where investors may receive only part of their request or none at all if their demanded yield is too high.
The auction results also showed that bids for the 10-year bond ranged between 15.00 per cent and 22.60 per cent, while bids for the 20-year paper ranged from 14.00 per cent to 18.49 per cent.
The DMO stated that although successful bids were allotted at marginal rates of 17.00 per cent and 17.04 per cent respectively, the original coupon rates of 22.60 per cent for the January 2035 bond and 16.2499 per cent for the April 2037 bond would be maintained.
The Federal Government has continued to ramp up domestic borrowing through bond auctions as it seeks to finance the widening fiscal gap in the 2026 budget amid mounting expenditure pressures.
Following the upward revision of the budget to N68.32tn by the National Assembly, the fiscal deficit rose to N31.46tn, with projected revenues estimated at N36.87tn and planned borrowing put at N29.20tn.
