DMO raises borrowing cost of FGN Bonds, crashes allotment to N485.50 billion

The Debt Management Office (DMO) has increased borrowing costs at its latest Federal Government (FGN) bond auction conducted on Monday, March 30 while significantly cutting allotments to N485.50 billion.

This is according to the auction results of reissued FGN Bonds seen by Nairametrics on Tuesday, which show a sharp rise in stop rates compared to the previous auctions in early February and mid-March 2026.

Despite strong investor demand, the DMO hiked the rates across the mid-; and longer maturities above previous stop rates, marking a shift in yield dynamics.

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What the data is saying

The latest FGN bond auction recorded strong investor interest, with total subscriptions exceeding the amount offered. However, the DMO opted for a more conservative allotment approach, signaling a possible attempt to manage rising debt costs.

• The auction featured the reopening of the AUG-2030, JUN-2032, and MAY-2033 bonds.
• It recorded total subscriptions of N931.50 billion against an offer of N750 billion.
• Only N485.50 billion was allotted.
• The MAY-2033 bond attracted N462.21 billion in subscriptions against an offer of N300 billion, the DMO allotted N332.71 billion, the largest share of total sales.
• The AUG-2030 bond saw N251.43 billion in bids versus N250 billion offered, only N88.80 billion was allotted.
• While the JUN-2032 bond recorded N217.87 billion in subscriptions with just N64 billion allotted out of N200 billion offered.

The Demand remained concentrated on longer-tenor instruments despite robust demand across all maturities.

More insights

The increase in stop rates at the auction indicates a rise in the government’s borrowing costs, marking a departure from earlier easing trends observed in the fixed-income market.

• The stop rate for the JUN-2032 bond rose by 41 basis points to 16.15%, while the MAY-2033 bond increased sharply by 90 basis points to 16.64%.
• The AUG-2030 bond cleared at 16.00%, further confirming elevated yield levels across the yield curve.
• Compared to the previous auction, where both the 2032 and 2033 bonds cleared at 15.74%, the latest rates represent a notable upward repricing.
• The higher yields suggest that investors are demanding greater returns to compensate for perceived risks such as inflationary pressures and fiscal uncertainties.

Overall, the surge in stop rates underscores a shift in market expectations, with investors pricing in higher risk premiums.

What you should know

The re-issued FGN bonds were originally offered at much higher stop rates than the current prevailing rates.

For instance, the AUG 2030 Bond was originally issued at 17.94% stop rate; the JUN 2033 Bond was originally offered at 17.95% stop rate while MAY 2033 Bond was originally offered at 19.89% stop rate.

However, rates are trending lower in recent primary market auctions at Nigeria’s fixed-income market.

• The CBN had earlier softened Treasury Bills rates in March, contributing to a general expectation of declining yields.
• Previous FGN bond auctions in February also cleared at lower rates, aligning with the easing trend.
• The latest auction results indicate that the DMO may have halted this trend by sharply increasing stop rates despite strong investor demand.
• Subscriptions at the auction more than doubled the offer, highlighting sustained liquidity and appetite for government securities.
• This contrasts with earlier trends where lower rates were sufficient to attract robust subscriptions.

The outcome suggests a shift in borrowing dynamics, where rising yields may reflect changing investor risk expectations even as the DMO attempts to limit borrowing costs through reduced allotments.

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