Investors Overbid for DMO’s First Bond Auction in Q3

Investors Overbid for DMO’s First Bond Auction in Q3

The Debt Management Office (DMO) first quarter bond auction in the third quarter was oversubscribed 3.6 times by investors.

As expected, Chapel Hill Denham said the first bond auction drew substantial bids from investors as subscription level reached ₦470 billion compared to ₦130 billion on offer.

This translates to 3.6 bid-cover ratio, though the consequently allotted ₦177 billion, while marginal rates settled at single digits across the four tenors on offered.

The tenor include N25bn of JAN 2026 at 5.99%, ₦42bn of MAR 2035 at 9.49% which is 151bps drop compared to June.

Also, ₦75bn of JUL 2045 came at 9.70%, and ₦35bn of MAR 2050 at 9.90% representing a 225bps decline compared to June.Investors Overbid for DMO’s First Bond Auction in Q3

With the surprising result of the auction, Chapel Hill Denham said the bullish run in the fixed income market looks set to continue, with yields likely to open gap down tomorrow.

Meanwhile, interbank funding rates eased marginally at the close of trading on Wednesday, as the financial system remained very liquid, opening at ₦443.3bn from ₦480.6bn in the previous session.

As a result, the Open Buy Back (OBB) and Overnight (OVN) rates declined by 20bps and 30bps to 1.90% and 2.50%, respectively.

Analysts said additional bond coupon payment is expected tomorrow, which should bolster liquidity.

“However, the CBN may likely carry out a routine CRR debit after the July bond auction settles on Friday”, Chapel Hill Denham stated.

Analysts Predict CRR Debits for Banks after July Bond Auction

Despite ongoing primary market activity (July bond auction), the fixed income market closed with a slight bullish bias, partly supported by buoyant liquidity.

While the NTB benchmark curve was unchanged at 2.10% on average, discount rates on OMO bills com-pressed by 28bps across benchmarks to 4.50%, with interest seen across mid (-61bps to 4.98%) and long (-23bps to 5.36%) day to maturity.

Similarly, bond yields also compressed marginally by 2bps to 7.19%, due to renewed appetite for long term bonds (-20bps to 9.64%).

In the foreign exchange market, Naira closed flat against the dollar in the I&E Window and parallel segment at ₦388.17 and ₦472.00 respectively.

The official and SMIS rates were also unchanged at ₦381 and ₦380.69 respectively, based on data from FMDQ, although the CBN quoted the official rate at 360 on its website.

Investors Overbid for DMO’s First Bond Auction in Q3

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