DMO holds stop rates steady as bond demand strengthens, but rations allotment

The Debt Management Office (DMO) conducted its July 2026 FGN bond auction on 20 July 2026, offering a total of N1.2trn. The amount offered was unchanged from the June auction through the re-opening of three instruments: the 22.60% FGN JAN 2035, 16.2499% FGN APR 2037, and, adding the 15.45% FGN JUN 2038.

Investor demand strengthened in July, with total subscriptions of N1.74trn, up from N1.41trn in June. This lifted the bid-to-offer ratio to 1.45x from 1.18x previously. Despite the stronger demand, the DMO allotted only N979.32bn (including N50.00bn non-competitive allotments), implying the DMO rationed volume rather than pay up for the incremental demand.

The bid-to-cover ratio rose to 1.78x from 1.16x. Stop rates on the two reopened instruments were held flat at 18.34% and 18.35%, while the newly reopened 15-year JUN 2038 cleared at 18.40%.

There was an increase in which was supported by average system liquidity of about N4.58trn in June 2026, down from N5.22trn in May as the CBN intensified OMO and Treasury bill sterilization activities.

Domestic institutional investors, particularly Pension Fund Administrators (PFAs), continued to dominate participation. On the 10-year JAN 2035 bond, subscriptions were N555.47bn, lifting the bid-to-offer ratio to 1.39x from 1.18x in June.

The 20-year APR 2037 bond saw an even stronger bid-to-offer ratio of 1.66x (N665.19bn), also up from 1.18x in June. The newly reopened 15-year JUN 2038 attracted N518.00bn, a 1.30x bid-to-offer ratio.
In the secondary market, trading activity remained relatively subdued as bearish sentiment persisted across the curve.

Average benchmark yields edged higher by 55bps to 17.62% as of July 20 2026, with sell-side pressure evident across most maturities.

Activity at the short end of the curve (0–5 years) with yields rising by 53bp to 17.92%, while the mid-segment (6–12 years) witnessed strong selloffs and long-end (>12 years) recorded repricing, with yields expanding by 71bps to 18.20% and 23bps to 15.50%, respectively.

The 10-Year (22.60% FGN JAN 2035) and 20-Year (16.2499% FGN APR 2037) marginal rates held flat at 18.34% and 18.35% respectively, unchanged from June; the newly reopened 15-Year (15.45% FGN JUN 2038) cleared at 18.40%.

This came despite subscriptions rising to N1.74trn from N1.41trn (bid-to-cover 1.78x, up from 1.16x), the DMO chose to leave some of
the demand unmet (N979.32bn allotted vs. a N1.2trn target) rather than pay up, a shift from June’s willingness to concede to higher rates.

Three forces help explain this: Headline inflation eased marginally to 15.91% in June from 15.93% in May, snapping the three months of upticks from March’s 15.38%. This firms the argument that inflation may be stabilising, though food inflation still rose to 17.52% y/y, keeping the
case for near-term easing unsettled.

Increased government borrowing FGN bond supply held steady at ₦1.20tn for a second month, though the DMO changed the parameters of the offer, cutting JAN 2035 and APR 2037 to ₦400bn each and adding the JUN 2038 (15-year) reopening, spreading issuance across three tenors.

Despite unchanged supply and stronger demand, allotment fell short of target for the first time in recent months (₦979.32bn vs. ₦1.2tn, 82%), suggesting the DMO is prioritising rate discipline over issuance.

Hawkish-for-longer policy stance and global risk repricing
The MPC’s 306th meeting concluded today (20–21 July), a hold at 26.50% is the our view, though unconfirmed at time of writing, auction timing within the MPC window plausibly kept some bidders sidelined.

Separately, Brent surged to $88/bbl by 20 July (from $72 in June) on escalating US–Iran conflict, keeping global risk premia elevated Coronation wrote in its advisory to investors.