The Federal Government raised a total of N211.144 billion from its December 2024 bond auction, significantly lower than the N346.155 billion raised in November.
The Debt Management Office (DMO), which conducted the auction, reopened two existing instruments: the 19.30% FGN APR 2029 (5-Year Bond) and the 18.50% FGN FEB 2031 (7-Year Bond).
The auction reflected a marked decline in both subscriptions and allotments, emphasizing a shift in market dynamics.
Decline in subscription and allotment volumes
In the December auction, held on December 16, 2024, total subscriptions across the two bonds amounted to N278.82 billion.
- This figure represented a N90.765 billion reduction, or 24.56% decline, from the N369.585 billion subscribed in November.
- The 5-Year Bond received N67.457 billion in subscriptions, down from N75.560 billion in November, reflecting a drop of N8.103 billion or 10.73%.
- Similarly, the 7-Year Bond saw a substantial reduction in subscriptions, dropping to N211.363 billion in December compared to N294.025 billion in November, a decline of N82.662 billion or 28.12%.
- The December auction also recorded a notable decline in the total allotment, with N211.144 billion raised compared to N346.155 billion in November.
- This represents a drop of N135.011 billion or a 39.00% decline.
- The allotment for the 5-year Bond fell to N51.857 billion from N63.530 billion in November, while the 7-year Bond allocation dropped to N159.287 billion from N282.625 billion.
The number of successful bids also fell significantly between the two months. In December, there were only 98 successful bids, compared to 198 in November, a steep decline of 100 bids or 50.51%.
This reduction suggests either diminished investor interest or stricter criteria for successful allotments.
Marginal rate stability despite lower demand
Despite the declines in subscriptions and allotments, marginal rates displayed relative stability, highlighting investor confidence in the Federal Government’s debt instruments.
- For the 5-year Bond, the marginal rate increased slightly from 21.00% in November to 21.14% in December, a modest rise of 0.14 percentage points.
- The 7-year Bond’s marginal rate remained steady at 22.00% across both months. These stable rates suggest that while demand may have weakened, the FG maintained attractive yields to entice participation.
- The decline in subscription and allotment volumes may be attributed to seasonal liquidity constraints typically experienced toward the end of the year, coupled with a cautious approach by investors ahead of potential changes in economic conditions.
Also, the reduced number of bids and lower allotment figures could indicate a more measured borrowing approach by the government to manage debt sustainability.