Investors Get Higher Rates on Nigerian Bonds at DMO Auction
The Debt Management Office (DMO) sold reopened FGN bonds at higher marginal rates amidst an accelerating headline inflation rate, according to details from its monthly primary market auction.
The inflation surge has widened negative interest yields on fixed-interest securities in the debt market. This has triggered demand for higher rates on borrowing instruments. To cover their respective exposures, investors have actively engaged in portfolio rebalancing amidst expectation of repriced spot rates on government instruments.
At the auction conducted on Monday, the DMO raised N369.5 billion from the reopening of 5-year and 7-year FGN bonds sold to investors.
MarketForces Africa reported that DMO offered FGN bonds worth N120.00 billion through re-openings of the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031 bonds.
The authority had sought to raise N60 billion from 5-year and 7-year reopened bonds. Auction results posted on the DMO website revealed that subscription levels came 3.08x across all maturities on offer. DMO offered to sell N120 billion but received subscriptions worth N369.58 billion from alpha seeking local investors.
Investors showed preference for longer-dated instruments, which accounted for 79.6% of total subscriptions for the 2031 bond and 20.4% for the 2029 bond. Accordingly, the DMO allotted ₦346.15bn, with the 2031 maturity receiving 81.6% of the total allotment. Stop rates printed higher at 21.00% and 22.00% on the Apr-29 and Feb-31 maturities, respectively.
The auction results stated that successful bids for the 19.30% FGN APR 2029 (re-opening, 5-year bond) & 18.50% FGN FEB 2031 (re-opening, 7-year bond) were allotted at the marginal rates of 21.00% and 22.00%, respectively.
DMO, however, said the original coupon rates of 19.30% for the 19.30% FGN APR 2029 & 18.50% for the 18.50% FGN FEB 2031 will be maintained #DMO Sells Bonds to Investors at Higher Rates Naira Plummets to N1690/$ after CBN Priced Spot Rate High
