ABUJA, Nigeria (VOICE OF NAIJA)- Investor demand for Federal Government bonds declined sharply in May 2026, even as yields rose at the latest auction conducted by the Debt Management Office.
Data released by the DMO showed that total subscriptions dropped by 45.6 per cent month-on-month to N516.17bn in May, compared to N947.99bn recorded in April.
At the May 18 auction, the DMO offered N300bn each for the reopened 22.60 per cent FGN January 2035 bond and the 16.2499 per cent FGN April 2037 bond.
The 10-year instrument attracted subscriptions valued at N262.23bn, while the 20-year bond received bids worth N253.94bn.
This marked a significant decline from the April auction, where investors submitted a combined N947.99bn across the 5-year, 7-year, and 10-year bonds offered by the DMO.
The April auction recorded subscriptions of N181.94bn for the 5-year bond, N167.04bn for the 7-year paper, and N599.02bn for the 10-year instrument.
READ ALSO: DMO Targets N800bn In February 2026 Bond Auction
Despite the weaker demand, yields increased at the May auction.
The 10-year bond cleared at a marginal rate of 17.00 per cent, up from 16.59 per cent recorded for the same tenor in April, while the 20-year bond cleared at 17.04 per cent.
In April, marginal rates stood at 16.30 per cent for the 5-year bond, 16.50 per cent for the 7-year instrument, and 16.59 per cent for the 10-year paper.
Analysis of the auction results indicated that demand for the 10-year bond weakened considerably in May, with subscriptions falling by 56.2 per cent from N599.02bn in April to N262.23bn.
However, total allotment rose sharply despite the decline in subscriptions. The DMO allotted N614.51bn in May, more than double the N276.79bn allotted in April.
The increase was largely driven by a N280bn non-competitive bid on the 20-year bond. The DMO allotted N476.84bn on the 20-year instrument and N137.67bn on the 10-year paper.
A non-competitive bid allows an investor to accept the yield determined at the auction instead of requesting a preferred rate.
It guarantees allocation of the requested securities, unlike competitive bids where allocations may be reduced or denied if the requested yield is considered too high.
The auction results also showed that bids for the 10-year bond ranged between 15.00 per cent and 22.60 per cent, while bids for the 20-year paper ranged from 14.00 per cent to 18.49 per cent.
The DMO stated that although successful bids were allotted at marginal rates of 17.00 per cent and 17.04 per cent respectively, the original coupon rates of 22.60 per cent for the January 2035 bond and 16.2499 per cent for the April 2037 bond would remain unchanged.
READ ALSO: DMO Launches Two New Savings Bonds For Subscription
The Federal Government has continued to increase domestic borrowing through bond auctions as it seeks to finance the widening fiscal deficit in the 2026 budget amid rising expenditure pressures.
Following the upward revision of the budget to N68.32tn by the National Assembly, the fiscal deficit increased to N31.46tn, with projected revenues estimated at N36.87tn and planned borrowing put at N29.20tn.