Nigeria to Open N460bn in Local Bonds for Subscription
Nigeria’s Debt Management Office (DMO) will hold its monthly auction for Federal Government Bonds, aiming to reopen 5-year and 7-year securities valued at N460 billion for subscriptions.
The offer size for the November auction is twice the previous offer as the authority moves to ramp up local borrowing after its successful eurobond market visit in Q4.
According to the auction circular, the office is anticipating raising N230 billion from the reopening of 5-year bonds and another N230 billion from the reopening of its 7-year local borrowing note.
The upward review in the bond issuance schedule was followed by a N650 billion extra allotment in the market, which triggered a material repricing along the curve. Investors were noted to demand an extra premium on duration, according to AAG Capital Limited.
The investment firm said this could see next auction test previous cut-off rates despite favourable inflation prints and a likely rate cut.
At its monthly auction in November, DMO sought to raise N260 billion across 5, and 7 years reopened bonds. Total subscription however came in multiple folds, settling above N1.27 trillion. The authority allotted bonds totalling N313.771 billion for successful investors and axed spot rates.
The spot rate on 5-year reopened bonds fell from 16% to 15.832% in October’s primary market auction. The DMO also slashed the spot rate for 7-year bonds to 15.85% from 16.20%.
The market anticipates further rate cuts at the bond auction next week, a projection that is anchored on sustained decline in headline inflation and widening real return on naira assets.
Some analysts do now, however, rule out surprise following the decision of the Central Bank of Nigeria (CBN) to keep rates on Nigerian Treasury bills unchanged at the midweek auction despite disinflation.
