Bond subscriptions crash 45.6% as investors demand higher yields

Investor appetite for Federal Government bonds weakened sharply in May 2026. Total subscriptions dropped by 45.6 per cent month-on-month, even as yields rose at the auction.

Data from the Debt Management Office (DMO) showed total market subscriptions fell to N516.17bn in May from N947.99bn 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 was a steep decline from April, when investors submitted a combined N947.99bn in subscriptions across the 5-year, 7-year, and 10-year instruments. In April, subscriptions stood at 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. The 10-year bond cleared at a marginal rate of 17.00 per cent in May, up from 16.59 per cent in April. The 20-year paper cleared at 17.04 per cent. In April, marginal rates were 16.30 per cent for the 5-year, 16.50 per cent for the 7-year, and 16.59 per cent for the 10-year.

Analysis of the auction results showed investor demand for the 10-year bond fell sharply. Subscriptions dropped 56.2 per cent, from N599.02bn in April to N262.23bn in May.

But total allotment rose sharply. The DMO allotted N614.51bn in May, more than double the N276.79bn allotted in April. The increase was 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 allows an investor to accept the yield determined at auction without specifying a rate. It guarantees allocation, unlike competitive bids where investors may receive only part of their request if their demanded yield is too high.

Bids for the 10-year bond ranged between 15.00 per cent and 22.60 per cent. Bids for the 20-year paper ranged from 14.00 per cent to 18.49 per cent.

The DMO said successful bids were allotted at marginal rates of 17.00 per cent and 17.04 per cent respectively. But the original coupon rates of 22.60 per cent for the January 2035 bond and 16.2499 per cent for the April 2037 bond will be maintained.

The Federal Government has continued to ramp up domestic borrowing through bond auctions. It is seeking to finance the widening fiscal gap in the 2026 budget amid mounting expenditure pressures.

After the National Assembly revised the budget upward to N68.32tn, the fiscal deficit rose to N31.46tn. Projected revenues are estimated at N36.87tn, while planned borrowing stands at N29.20tn.