FGN Bond Subscriptions Drop 45% as Investors React to Higher Yields in 2026 Auction

Investor confidence in Federal Government of Nigeria (FGN) bonds weakened in May 2026, as total subscriptions dropped sharply by 45.6 per cent compared to the previous month. This decline came even as the Debt Management Office (DMO) raised yields at its latest bond auction in an attempt to attract stronger demand.

According to official data from the DMO, total subscriptions fell to N516.17bn in May, down from N947.99bn recorded in April. The May 18 auction featured two reopened instruments: a 22.60 per cent FGN January 2035 bond and a 16.2499 per cent FGN April 2037 bond, each offered at N300bn. Despite the higher returns on offer, investor appetite remained subdued.

The 10-year bond attracted N262.23bn in subscriptions, while the 20-year paper recorded N253.94bn. This marked a significant slowdown compared to April’s auction, where demand was much stronger across shorter-dated instruments, particularly the 10-year bond which alone accounted for N599.02bn in subscriptions.

Although demand weakened, the government actually raised more money in May. Total allotments surged to N614.51bn, more than double April’s N276.79bn. This increase was largely supported by a large N280bn non-competitive bid on the 20-year bond, which guaranteed allocation at the prevailing auction yield. The 20-year paper received N476.84bn in total allotments, while the 10-year bond received N137.67bn.

The DMO noted that marginal rates rose slightly, with the 10-year bond clearing at 17.00 per cent and the 20-year bond at 17.04 per cent. Analysts attribute the weaker demand to shifting investor expectations in a high-interest-rate environment, even as the government continues heavy domestic borrowing to fund a widened 2026 fiscal deficit now estimated at N31.46tn.

source: punch