FGN bonds attract N1.41trn as yields climb on rising borrowing....

The Federal Government (FG) raised N1.41 trillion from investors at its June 2026 bond auction, as strong demand for long-term securities continued despite a sharp increase in yields, underscoring sustained appetite for naira assets amid rising domestic borrowing costs.

Data from the Debt Management Office (DMO) showed that total subscriptions exceeded the N1.2 trillion offered by N213.49 billion, reflecting robust participation from institutional investors even as borrowing costs rose across the yield curve.

The government offered N600 billion each for the reopened 22.60 per cent FGN January 2035 bond and the 16.2499 per cent FGN April 2037 bond, bringing total issuance to N1.2 trillion.

Investors submitted bids of N705.22 billion for the 2035 instrument and N708.27 billion for the 2037 bond, bringing total subscriptions to N1.41 trillion.

The DMO eventually allotted N1.222 trillion, including N600.90 billion for the 2035 bond and N621.00 billion for the 2037 bond, indicating full subscription and additional non-competitive allocations.

The auction was cleared at marginal rates of 18.34 per cent for the 2035 bond and 18.35 per cent for the 2037 bond, significantly higher than previous levels and reflecting increased funding costs for the Federal Government.

The rise in yields was evident across both instruments, with the 2035 bond marginal rate increasing by 134 basis points from 17.00 per cent in May, while the 2037 bond rose by 131 basis points from 17.04 per cent.

Despite higher borrowing costs, investor demand remained strong, with both instruments recording oversubscription.

The 2035 bond was oversubscribed by N105.22 billion, while the 2037 bond recorded excess demand of N108.27 billion.

The longer-dated 2037 bond attracted slightly stronger interest, accounting for just over half of total subscriptions and receiving the highest allocation of N621 billion.

Investor participation also improved significantly during the month, with total bids rising to 394 in June from 265 in May, while successful bids increased to 316 from 175.

The wider range of bids, spanning 16.00 per cent to 22.60 per cent for the 2035 bond, highlights divergent investor expectations amid rising inflationary pressures and shifting monetary conditions.

The increase in stop rates signals a higher cost of domestic borrowing for the Federal Government, even as it continues to rely on the local debt market to finance fiscal needs.

The June auction also reflected a sharp jump in activity, with total subscriptions rising from N516.17 billion in May to N1.41 trillion in June, representing a 173.8 per cent month-on-month increase.

Similarly, total allotments nearly doubled from N614.51 billion to N1.22 trillion, while the issuance size also expanded from N600 billion to N1.2 trillion.

Analysts said the outcome reinforces the continued role of domestic investors, particularly banks, pension funds and asset managers, in absorbing government debt despite tightening financial conditions.

The strong demand for FGN bonds comes amid persistent inflationary pressure and elevated interest rates in the Nigerian economy, which continue to shape investor behaviour across fixed income markets.

While yields have climbed, government securities remain attractive to risk-averse investors seeking stable returns, especially as equity markets experience intermittent volatility.

The latest auction outcome highlights Nigeria’s deepening reliance on the domestic debt market as fiscal pressures persist, with investors continuing to provide funding even at higher yield levels.