Not the best auction for the DMO

At its latest monthly auction of FGN bonds this week, the DMO offered N60bn, attracted a total bid of N67bn and raised N31bn (US$100m) from sales. The bid and the sales were the lowest since August 2017 and November 2016 respectively. Additionally, the DMO offered the same paper as the previous month, and the marginal rates were higher for two instruments by up to 30bps and unchanged for the third (the five-year benchmark). Despite the increase in the marginal rates, the DMO has created some breathing space for itself.


  • We understand that some offshore investors exited the market at the start of the week. It also appears that the domestic institutions are no longer attracted by the returns on NTBs and are drawn to the longer maturities in the FGN bond market. The overall modest bid was concentrated on the Feb ‘28s, the longest maturity on offer.
  • Our take is that yields have settled on a plateau for the weeks ahead. We detect some weariness among domestic players and sense that the offshore community is guided by the normalization of US monetary policy. The returns on Nigerian paper are among the best in the EM universe for local currency government debt. We have often said that Nigeria enjoys some insulation from EM wobbles but it is not however immune from their impact.
  • The DMO has some breathing space because its domestic funding target in the 2018 budget has been trimmed to N790bn from N1.25trn the previous year.
  • Budget and calendar years overlap of course but the DMO raised N1.45trn from its monthly auctions in 2017 and has achieved a further N430bn year-to-date.

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