DMO Raises Borrowing Costs, Cuts Bond Allotment

The Debt Management Office has raised borrowing costs at its latest Federal Government bond auction while reducing total allotment to N485.50 billion.

The auction, which featured reissued bonds, recorded strong investor interest, with total subscriptions reaching N931.50 billion against an offer of N750 billion. However, the DMO adopted a cautious approach by allotting less than the amount offered.

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Demand was strongest for longer-tenor instruments, with the MAY-2033 bond attracting N462.21 billion in subscriptions. Of this, N332.71 billion was allotted, representing the largest share of total sales.

The AUG-2030 bond recorded N251.43 billion in bids against N250 billion offered, with N88.80 billion allotted. Meanwhile, the JUN-2032 bond saw N217.87 billion in subscriptions, with only N64 billion allotted from an offer of N200 billion.

Stop rates rose significantly across the maturities, indicating higher borrowing costs. The JUN-2032 bond increased by 41 basis points to 16.15 per cent, while the MAY-2033 bond rose sharply by 90 basis points to 16.64 per cent. The AUG-2030 bond cleared at 16.00 per cent.

Compared to previous auctions where rates hovered around 15.74 per cent, the latest figures reflect a notable upward repricing.

The rise in yields suggests that investors are demanding higher returns to compensate for risks such as inflationary pressures and fiscal uncertainties, signalling a shift in market sentiment.