A new 10-year tenured bond was issued by the Debt Management Office (DMO) with the highest yield and coupon rate ever recorded for FGN bonds, 22.60%.
On Monday, January 27, the 10-year bond, also known as the (Jan-2035), was first auctioned. It had the highest coupon rate ever recorded, at 22.60 percent.
In contrast to the N200 billion offered by the DMO, the bond’s high coupon attracted investors, resulting in an oversubscription of N368.1 billion.
According to Atiko Audu, chief investment officer at ARM Pension Managers, investors could take advantage of the 200 basis point yield pick-up between the March 2035 and January 2035 FGN bonds.
“At 20.5 percent, sell your March 2035 shares, and at 22.6 percent, purchase new January 2035 holdings. The latter has a significantly higher yield and is a shorter tenor,” Audu stated.
The DMO reopened the five-year (APR-2029) and seven-year (FEB-2031) instruments at Monday’s primary market auction. The new JAN-2035 bond was also issued.
“Most investors are attempting to lock in long-term assets due to the anticipated of various macroeconomic changes such as inflation and monetary policy rate (MPR). The new 10-year bond will also attract lots of attention because of this,” Matilda Adefalujo, fixed-income analyst at Meristem Securities, said.
The rally did not exclude the February 2031 bond, which became the first Nigerian bond to be issued worth more than N2 trillion.
According to Audu, the accomplishment has allowed more bonds to traverse this rubicon.
The DMO issued N2.1 trillion as of Wednesday, February 2031.
This was bolstered by the instrument’s increasing yield, which increased from 18.50 percent at its inception to a record high of 22.50 percent.
Compared to the N150 billion it set out to auction, the DMO sold N9 billion more.
Due to investors locking in longer tenors for greater rates, the shortest-tenor bond offered in April 2029 was not oversubscribed. The yields on it reached a record high of 21.79 percent.
The DMO put up N450 billion for sale but ultimately sold N606.46 billion at the auction.
This year’s first FGN bond auction results support CardinalStone analysts’ recommendation that investors should commit to longer-term securities.
Its 2025 outlook stated, “Overall, we expect yields to be mostly stable in H1 ’25 before moderating in H2 ’25 and therefore favour stronger allocations to long duration, giving its edge from price appreciation and greater protection against re-investment risks.”
According to the Debt Management Office (DMO), the federal government intends to raise no more than N1.8 trillion from the bond market in the first quarter (Q1) of 2025.
