Nigeria’s Debt Management Office (DMO) recorded robust demand at its June bond auction with total bids of ₦602.9 billion for a ₦100 billion offering as investors responded positively to signs of easing inflation and expectations of a more dovish monetary policy stance.
The auction offered two reopened Federal Government bonds, the April 2029 and June 2032 maturities, with an equal supply target of ₦50 billion each.
The combined bid-to-offer ratio jumped to 6.0 times, a significant rise from under 1.5 times in May, when the DMO recorded ₦436.3 billion in bids for a larger ₦300 billion issuance.
The stop rate for the 2029 bond dropped to 17.75 percent while the 2032 tenor cleared at 17.95 percent, both representing lower yields compared to the previous auction.
Market analysts attributed the downward adjustment in yields to improved investor sentiment and Nigeria’s moderating inflation trend. Headline inflation eased for a second consecutive month in May, falling to 22.79 percent year-on-year from 23.71 percent in April, according to the National Bureau of Statistics.
“The downward shift in yields reflects improved market sentiment and lower inflation readings,” FBNQuest stated in a note to clients on Thursday.
The firm added that the market is now pricing in a possible cumulative policy rate cut of 50 to 100 basis points before the end of the year, should the disinflationary trend hold.
Demand was heavily skewed towards the longer-dated 2032 bond, which attracted ₦561.2 billion in bids — more than 11 times the amount on offer.
The DMO ultimately allotted ₦99 billion to investors, while the reopened 2029 tenor saw only ₦41.7 billion in bids, leading to a modest allotment of ₦1.1 billion.
The Central Bank of Nigeria (CBN) has held its benchmark policy rate steady for two consecutive meetings amid signs that inflationary pressures are moderating. Market strategists note that further improvement could allow the CBN to adopt a looser policy stance later this year, provided external risks remain contained.
Despite the local momentum, risks persist. FBNQuest pointed to ongoing geopolitical tensions, including the Iran-Israel conflict and trade friction following US President Trump’s latest tariff measures, which could limit the CBN’s flexibility to ease rates aggressively.
Secondary market sentiment has also strengthened, with bond yields declining by about 42 basis points month-to-date, settling at an average of 18.44 percent.
The sustained demand has improved market liquidity and reduced the government’s borrowing costs at auction.
Analysts expect the DMO to maintain moderate supply levels in the coming months to support the trend of lower yields and stable borrowing costs. If sustained, this could ease fiscal pressures and strengthen confidence in Nigeria’s domestic debt market.
