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The demand at the March FGN bond auction dropped as a result of poor liquidity in the system.
Total demand at the auction was significantly lower than in the previous month, with bids amounting to N530 billion, compared with N1.63 trillion in February. Consequently, total sales stood at NGN271bn, well below the NGN910.4bn recorded at the prior auction.
“Market liquidity has been tight for some weeks now, preventing a lot of traders from taking part in the auction,” Joshua Joseph, a fixed-income analyst at CSL Stockbrokers, said.
The market was short 923.56 billion on Monday, the day of the auction.
The auction includes two offerings, a N200 billion re-opened five-year savings bond, maturing in April 2029, and a N100 billion re-opened nine-year savings bond, maturing in May 2033.
Read also: DMO to auction N450bn bonds as CBN launches FX code
The Debt Management Office (DMO) raised N271 billion for the Federal Government, meeting its target to secure up to N1.8 trillion in the first quarter of 2025.
Lynda Nzekwe, fixed-income dealer at Commecio Partners, said that the bond market has experienced significant repricing following the revision of the February auction circular, particularly with the removal of the 2035s, which triggered a broad-based yield compression exceeding 200 basis points.
“ Liquidity constraints and persistent FX pressures initially fueled bearish sentiment, despite the CBN’s sustained intervention in the official market. However, market dynamics shifted as a weak bond auction on Monday reinforced the Debt Management Office’s (DMO) cautious approach to rate management,” she said.
On the five-year bond, the DMO sold N4.7 billion at a yield of 19.0 percent down from 19.20 percent at the last auction.
The nine-year bond got the most investors’ attention, seeing almost five times its offer, however only N266 billion was sold at a yield of 19.99 percent.
“The downward shift in yields aligns with the moderation in inflation, which eased to 23.18 percent in February 2025 from 24.48 percent in January,”
“The market is also adjusting to signals from the Monetary Policy Committee, which, at its February meeting, hinted at potential policy adjustments in response to the revised inflation outlook,” analysts at FBNQuest said in its report today.
