Government Borrows N203.36bn More at March Bond Auction as Subscription Remains High

Notwithstanding the negative real return, rising inflation expectations, and monetary tightening, the demand for long-dated government instruments has stayed strong. The bond auction received a subscription of N808.61bn as against N360bn offered, meanwhile DMO sold only N563.36 with the 2037 and 2049 acquiring the extra amount. Compared to the February auction, the marginal rate fell for the APR 2032, APR 2037, and APR 2049 by 101bps, 440bps, and 156bps to 14.90%, 15.20%, and 15.75% respectively while Feb 2028 had a slight increase to 14.00%. Analysts expect the market to turn bearish with the hawkish stance of MPC to fight inflation, as upward adjustment of the recent coupon rate makes old bondholders worse off (see table 1 below).