Debt Office Plans to N2.5trn FGN Bond Auction for Monday
Patience Oniha, DMO Boss

The Nigeria Debt Management Office (DMO) plans to raise N2.5 trillion today from FGN bond sales from the capital market.  Analysts said they expect the outcome of this month’s FGN bond auction to influence the direction of yields in the secondary market.

At the auction, the DMO would be offering instruments worth N2.50 trillion through new issuances of the FGN FEB 2031 (7-year) and FGN FEB 2034 (10-year) bonds. Based on prevailing sentiment in the fixed income market, analysts expect demand to be solid.

Their expectations hinged on spot rates repricing following the apex bank’s 19% rates on 364-day treasury bills instrument at the last auction. To a certain extent, liquidity will determine subscription level at today’s auction, fixed interest securities analysts told MarketForces Africa.

On Friday, the money markets’ short-term benchmark interest rates decline due to robust liquidity in the financial system. According to data from the FMDQ platform, the overnight lending rate contracted by 7 basis points to 16.9%.

Analysts said the financial system has remained buoyant from the previous week, further supported by N40 billion inflows from OMO bill maturities. Though the market recorded debits for CRR maintenance.

Accordingly, the average system liquidity this week settled higher at a net long position of NGN302.20 billion from a net long position of N242.23 billion, according to Cordros Capital Limited.

In the secondary market, bearish sentiments persisted on FGN Bonds as the average yield increased by 63 basis points to close last week at 16.1%.  Local investors exit their fixed interest securities assets positions ahead of the February 2024 bonds auction and the underwhelming inflation rate record released by the NBS on Thursday.

Across the benchmark curve, Cordros Capital Limited told investors in an update that the average yield expanded at the short (+86bps), mid (+69bps) and long (+66bps) segments. The yield surge followed sell-offs of the JAN-2026 (+257bps), JUN-2033 (+125bps) and APR-2049 (+187bps) bonds, respectively.

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