Finance

FG raises N1.92trn bonds in 7 months

DMO gives Tinubu conditions to meet before borrowing

The federal government through the Debt Management Office (DMO) has raised N1.923 trillion from bond auctions since the beginning of the year. The funds was raised through the FGN bonds and the FGN Savings Bonds meant for retail investors.

The debt office had raised N1.917 trillion from the FGN bond auctions and another N6.66 billion through the FGN Savings Bond in the eight-month period.
Investors had staked the highest in June with a total subscription of N417.48 billion to the 10, 20 and 30-year FGN bonds. The DMO allotted N325.8 billion through the 16.2884 per cent 10-year bond, 12.50 per cent 20-year paper and 12.98 per cent 30-year paper. It had also raised N4.5 billion through non-competitive allotment.

Subscription dropped in July to N286.11 billion as investors bid at higher rates, while N138.07 billion had been allocated. Another N103.9 billion was also raised through the non-competitive allotment. In August, subscriptions had risen to N414.07 billion of which only N260.09 billion was allocated for the 13.98 per cent 10 year paper, 12.4 per cent 20-year paper and 12.98 per cent 30-year paper.

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In January, the DMO had raised N170.34 billion from FGN bond auctions the lowest it raised at the monthly bond auctions while it raised another N202.55 billion in February in March it raised N262.1 billion and N274.45 billion in April while N175.24 billion had been raised through the FGN bond auctions in May.
The highest savings bond was raised in February when investors staked N1.76 billion on the 2- and 3-year retail bond. It is followed by N961.99 million that was raised in July.
raise N888.21 million through the savings bond in August.

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Last week, trading in the Treasury bonds secondary market also closed on a bullish note, as investors sought to fill lost bids from previous bond auction. Specifically, the average yield declined by 17bps to 11.4 per cent. Across the benchmark curve, the average yield declined at the short (-5bps), mid (-41bps) and long (-7bps) ends following demand for the MAR-2024 (-39bps), MAR-2027 (-77bps) and MAR-2036 (-21bps) bonds, respectively.

At the bond auction, the DMO offered instruments worth N150 billion to investors through re-openings of the 13.9800 per cent FGN FEB 2028 (Bid-to-offer: 1.55x; Stop rate: 11.60 per cent, previously: 12.35 per cent), 12.4000 per cent MAR 2036 (Bid-to-offer: 2.10x; Stop rate: 12.75 per cent, previously: 13.15 per cent) and 12.9800 per cent FGN MAR 2050 (Bid-to-offer: 3.55x; Stop rate: 12.80 per cent, previously: 13.25 per cent) bonds.

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As expected, demand was higher (subscription: N360.02 billion; bid-to-offer: 2.4x) than July’s auction (Subscription: N286.11 billion; Bid-to-offer: 1.9x). The DMO eventually over-allotted instruments worth N260.09 billion, resulting in a bid-to-cover ratio of 1.4x.

Analysts say they lower yields given expectations of limited supply and deliberate efforts by the DMO to reduce domestic borrowing costs for the government.
Meanwhile, at the Treasury Bills Market, analysts say they expect quiet trading as the Central Bank of Nigeria is set to roll over N157.20 billion worth of maturities to market participants at its bi-weekly PMA.

“Afterwards, we envisage the trend of lower yields on T-bills to continue as market participants take positions due to expectations of further decline in auction stop rates amidst the CBN’s continued absence from the OMO primary market,” analysts at Cordros Research stated in an emailed note.

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