Nigeria’s total debt stock hits N24.9 trillion- DMO
Patience Oniha, DMO DG

Bond Auction: DMO Sets to Offer ₦130 Billion across Four Tenors

The Nigeria’s Debt Management Office (DMO) is set to conduct first bond auction on Wednesday with N130 billion offer across four tenors.

Debt Office will be reopening three bonds – JAN 2026, MAR 2035 and MAR 2050, while a new 25-year benchmark (JUL 2045) will be introduced.

Analysts said they expect the auction to be well bid in line with recent trend.

MarketForces reported that the bond auction calendar for Q3-2020 was released last week, with the DMO looking to raise ₦340 billion to ₦460 billion.

Meanwhile, analysts remarked that the upper band of the issuance range is much lower than ₦667 billion raised in Q2-2020.

In the bond market, yields fell by 39 basis points (bps) week on week (wow) to set a new multi-year low of 7.28%, with the bellwether 30-year benchmark setting a new low of 10.59% from 10.96%.

Primary market activity resumed last week with a rollover Nigerian Treasury Bills (NTB) auction.

The DMO had offered ₦107.05 billion, but subscription reached N189.14 billion, with bid-cover ratio of 1.8.

Stop rates compressed by 21bps to an average of 2.15% as 91-day cleared at 1.30% having plunged by 49bps.

Also, 182-day closed at 1.80% after 11bps decline and 364-day at 3.35% having dropped by 4bps.

Meanwhile, naira remained under pressure last week. In the Investors & Exporters Window (IEW), the FX rate weakened by 0.4% or ₦1.50 to ₦388.50.

Analysts stated that liquidity in the window with average daily turnover improved by 17.8% wow to US$41mn, although still below Q1-2020 level of C.US$345mn.

Similarly, naira weakened by ₦5 or 1.1% wow to a new low of ₦470 in the parallel market.

Bond Auction: DMO Sets to Offer ₦130 Billion across Four Tenors
Patience Oniha, DMO DG

The official and SMIS rates were also unchanged at ₦381 and ₦380.69 respectively, based on data from FMDQ data.

Although, Chapel Hill Denham explained that the CBN quoted the official rate at N360 on its website.

Nigeria’s external reserves stood out at US$36.12bn as at 15 July, analysts remarked that the organic portion could be less than US$20 billion after excluding SWAPs.

SWAP totaled was US$8.6bn in March and non-resident holding of OMO bills totaled US$10.6bn in the same period.

Read Also: MPC Maintains Status Quo, Holds Key Rates

Last week, OPEC+ nations agreed to scale back production cuts from 9.9mb/d to 7.7mb/d from August to December.

However, Nigeria, Angola, Iraq and Kazakhstan may have to compensate for lack of full compliance with the previous cut.

Chapel Hill Denham stated that aggregate production cuts will likely remain at 8 million barrels per day (mb/d) in Q3-2020.

As a result, Nigeria’s oil production between August and September has been pegged at 1.359mb/d from 1.5mb/d produced in June.

Against this backdrop, Chapel Hill Denham said it expects accretion to external reserves from organic sources to remain weak in the near term.

“Although proceeds from foreign currency (FCY) multi/bi-lateral loans could provide some support”, the investment firm stated.

In a related development, the bulls reigned supreme in the fixed income market last week, as funding pressures eased on the back of OMO and bond coupon payments.

Analysts at Chapel Hill said at the front end of the curve, discount rates on benchmark OMO and treasury bills compressed by 26bps and 16bps wow to an average of 5.35% and 2.14% respectively.

Three bond coupon payments are expected at estimated value at ₦133 billion. Also, FAAC inflow for July is also expected to hit the system this week.

The first bond auction for Q3 is scheduled to hold this week on Wednesday, with the DMO set to offer ₦130bn across four tenors: ₦25bn of JAN 2026 (re-opening), ₦35bn of MAR 2035 (re-opening), ₦35bn of JUL 2045 (new issue) and ₦35bn of MAR 2050 (re-opening).

Bond Auction: DMO Sets to Offer ₦130 Billion across Four Tenors

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