Investors oversubscribe FGN Bond Auction

Investors oversubscribed the FGN Bond Auction for June 2018, held Wednesday, at which bonds in three tenors – five years, seven years and 10 years were offered.
The Debt Management Office (DMO) said in a statement that investors bid for N66.7 billion compared to the N60 billion on offer.
The debt management agency stated that this was despite the sale of US$210 million foreign exchange (FX) by the Central Bank of Nigeria (CBN) last Thursday, which mopped up over N65 billion from the market.
“In addition, the CBN also mopped up over N200 billion from the system through the sale of OMO Bills on Monday.
The FX sale and the OMO (Open Market Operation Auction tightened market liquidity and pushed up interest rates.
“To moderate Debt Service Costs, the DMO adopted a conservative approach by allotting only N31.2 billion at rates between 13.50% and 13.81%,” the statement said. This is not the first time in the year investors had oversubscribed FGN Bonds. Economic confidential recall that January this year, investors in the capital market had shown strong appetite for the federal government Bond as they oversubscribed the first auction conducted by the Debt Management Office (DMO) in the year. Eurobonds DMO had offered the bond with some maturing in July 2021 and others maturing in March 2027. The 14.50% FGN JUL 2021 was allotted at a rate of 13.3800%, while the 16.2884% FGN MAR 2027 was allotted at 13.4910%. Both were oversubscribed, with total subscriptions of N150 billion, representing 136%. The subscription level was higher for the 10-year benchmark bond, which indicates investors’ preference for longer dated instruments. The DMO allotted a total of N110 billion, which was the amount offered in its circular released ahead of the Auction. The 14.50% 2021 was allotted at a rate of 13.3800%, while the 16.2884% 2027 was allotted at 13.4910%. DMO which released its Issuance Calendar for Q1, 2018 recently, has given details of its Auctions for the quarter. The organization has structured the auctions to ensure appropriate to provide long-term funds for the government for development purposes, without crowding out the private sector.