Market News

The Debt Management Office (DMO) saw a robust demand at its June bond auction, drawing N602.9 billion in bids for a N100 billion offering, signalling growing confidence that easing inflation and dovish monetary policy lie ahead.

The auction, held on Monday, featured two maturities—April 2029 and June 2032—each with a N50 billion supply. The bid-to-offer ratio surged to six times, up from under 1.5 times in May, when bids totalled N436.3 billion for a N300 billion placement.

Buoyed by strong investor interest, the DMO cut its stop rates to 17.75% for the 2029 bond and 17.95% for 2032, both declines from the previous auction.

“The downward shift in yields reflects improved market sentiment and lower inflation readings,” FBNQuest said in a Thursday note.

Nigeria’s headline inflation declined to 22.79% year-on-year in May, down from April’s 23.71%, marking the second consecutive month of deceleration.

That cooling trend has supported the Central Bank of Nigeria’s decision to hold its policy rate steady for two straight meetings. FBNQuest adds that “the market is now pricing in a cumulative rate cut of 50 bps to 100 bps by year-end.”

Yet, global headwinds, like the ongoing conflict between Iran and Israel, coupled with trade-related tensions triggered by U.S. President Trump’s tariff actions remain a key consideration, which could limit the Central Bank of Nigeria’s room to manoeuvre.

These headwinds, FBNQuest noted, will “likely support the MPC’s case of holding rates for a prolonged period.”

Demand was particularly skewed toward the longer-dated 2032 tenor. Investors placed N561.2 billion in bids, some 11.2 times the N50 billion offered. This forced the DMO to allocate only N99 billion despite the torrent of interest.

By contrast, the reopened April 2029 tenor drew just N41.7 billion in bids. That fell short of its N50 billion offer, resulting in a mere N1.1 billion allotment.

Secondary markets are also responding to the positive momentum. Bond yields have dropped roughly 42 basis points month-to-date, settling at an average of 18.44%, yielding attractive returns for investors as sentiment shifts.

Market strategists like FBNQuest suggest that continued easing inflation could embolden the DMO to keep future bond supply modest and gradually taper yields. They say if sustained, this could reduce Nigeria’s borrowing costs and support the broader financial market.