DMO to Open N100bn Bonds for Subscription, Rates Outlook Mixed
The Debt Management Office (DMO) has revealed a plan to raise N100 billion at its monthly primary market auction on June 24, according to a circular released, with June 23 set as the settlement date.
Hence, trading activities in the secondary market heated up with bullish sentiments on the 2033 bonds, following the release of the June offer circular. The debt office has continued to tighten its fist on spot rates amidst efforts to reduce borrowing costs.
With the softening inflation rate, analysts said they don’t expect rates to jerk up in surprise.
The debt office’s June offer circular revealed a total of N50.00 billion each on offer for a re-tap of the 2029 bond and a new issuance of the 2032 bonds will be opened for subscription next week Monday.
Analysts are projecting that the amount on offer will be oversubscribed on the back of robust liquidity in the financial system. However, analysts expressed different views on spot rate directions due to disinflation.
Some argue that the latest decline in the headline inflation rate and excess liquidity in the banking system could provide an opportunity for spot rates repricing at the main auction.
“For re-openings of previously issued bonds, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument”, the DMO said.
The average yield on Nigerian bonds has declined to 18.5%, raising risks of potential offshore investors exiting the local market. Across the benchmark curve, the average yield was flat at the short and mid segments but contracted at the long (-2 bps) end, driven by the demand for the JUN-2053 (-18 bps) bond. Nigeria Boosts Trade Surplus to N5.17trn as Imports Taper
