Gilt-edged Securities Investors Double Down on FGN Bond
Patience Oniha, DG, DMO

Gilt-edged Securities Investors Double Down on FGN Bond

The Debt Management Office (DMO) says a total of N60 billion bond it offered for the month of December was oversubscribed by more than N70 billion.

This is contained in a statement obtained from DMO’s website on Wednesday as Primary Market Auction is skipped for the week.

At the auction, Debt Office offered a total of N60 billion at the FGN Bond for December 16, 2020.

The offer was oversubscribed as total bids received were N134.056 billion, a subscription level of over 220 per cent, the report reads.

DMO stated that the rates of 6.945 per cent and 7.000 per cent for the 15-year and 25-year FGN Bonds, were higher than the rates of 5.000 per cent and 5.785 per cent at the last auction in October.

“The rates reflect the level of interest rates in the market influenced in part by Monetary Policy Actions,’’ it said.

The fixed income market recently recorded adjustment to rates as the apex bank issue special bill at 0.5% in order to strengthen an already damaged liquidity in the banking sector.

Due to higher cash reserve ratio requirement for failing to meet the Central Bank of Nigeria’s 65% loan to deposit ratio target, a large chunk of deposit were sterilised.

Analysts are projecting uptick in fixed income market rates as DMO implements borrowing plan for the first quarter of 2021.

Read Also: Gilt-edged Market Records Stable Rate on T-Bills ahead of CBN Auction

FGN Bonds, debt securities issued by the DMO for and on behalf of the Federal Government has an obligation to pay the bondholder the principal and agreed interest as and when due.

The Federal Government issues Bonds for some of the following reasons to finance fiscal deficits in a non-inflationary and sustainable manner, to enhance fiscal discipline of the Government, to refinance maturing debt obligations and to establish benchmark yield curve.

Gilt-edged Securities Investors Double Down on FGN Bond