FG’s 10-year bond rallies on 22.6% yield

…DMO sees oversubscription on 7-year, 10-year bonds

The Debt Management Office (DMO) opened a new 10-year tenured bond at 22.60 percent, the highest yield and coupon rate on record for FGN bonds.

The 10-year bond, also referred to as the (Jan-2035), is a new FGN bond that was first auctioned on Monday, January 27, at a coupon rate of 22.60 percent, also the highest coupon rate on record.

The high coupon on the bond attracted investors which led to an oversubscription of N368.1 billion as opposed to the N200 billion put up by the DMO.

Atiko Audu, chief investment officer at ARM Pension Managers, advised investors to take advantage of the yield pick-up of 200 basis points between the March-2035 and Jan-2035 FGN bonds.

“Sell your holdings on March-2035s at 20.5 percent and buy new holdings of Jan 2035s at 22.6 percent. The latter is a shorter tenor with much higher yield,” Audu said.

At the primary market auction on Monday, the DMO re-opened the five-year (APR-2029), seven-year (FEB-2031) instruments, along with the issuance of the new JAN-2035 bond.

“What most investors are trying to do is lock in long-term instruments because there’s an expectation of different 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 Feb-2031 was not left out of the rally as it made history as the first Nigerian bond to cross over the N2 trillion in issuance.

Audu said that the feat has now paved the way for more bonds to cross this rubicon.

Read also: DMO to auction N450bn bonds as CBN launches FX code

As of Wednesday, the DMO had issued N2.1 trillion worth as of Feb-2031.

This was supported by the growing yield on the instrument, which reached a record high yield of 22.50 percent from 18.50 percent when it was first issued.

The DMO sold N9 billion more than the N150 billion it set out to auction.

Although April-2029, the shortest tenor bond offered wasn’t oversubscribed as investors locked in longer tenors for higher yields. Yields on it increased to 21.79 percent, which is a record high.

Overall the DMO sold a total of N606.46 billion at the auction as against N450 billion it put up for sale.

The outcome of the first FGN bond auction this year aligns with the prescription from analysts at CardinalStone that investors should lock in on longer-term instruments.

“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” it mentioned in its 2025 outlook.”

The federal government is planning to raise not more than N1.8 trillion from the bond market in the first quarter (Q1) of 2025, according to the Debt Management Office (DMO).