DMO bond auction raises N56bn out of N150bn on offer

Debt Management Office raised a total of N56.05 billion in a bond auction out of the N150 billion it intended to raise on behalf of the federal government. lIt was learnt that domestic pension funds and insurance firms cut orders due to low yields.

The Debt Management Office (DMO) offered N135 billion worth of bonds maturing in 2021, 2027 and 2037, but investors shunned the auction to take positions in the relative liquid secondary market.DMO had put N35.00 billion worth of bonds maturing in 2021, N50.00 billion that would mature in 2027 and another N50.00 billion for 2037. Of these, there were 12 bids for the 2012 seeking to subscription of N10.38 billion, 33 bids for 2027 subscribing for N19. 91 billion and N33.36 billion for the 2037 bond offer.

The bid result showed that N9.18 billion was allotted to the bids for the bonds maturing in 2021, N17.51 billion to bonds request maturing in 2027 and N29.36 billion for maturing bonds in 2037. This implies that at the Wednesday’s auction, the debt office sold N9.18 billion worth maturing in five years, N17.51 billion maturing in 10 years and N29.36 billion maturing in 20 years.

The DMO paid 16.80 percent for the 2021 and 2027 bonds and 16.90 percent for the 2037 debt. Investors demanded yields as high as 17 per cent, auction results showed, to help boost returns further above inflation, which was 16.1 per cent in June.

“Pension funds and insurance firms cut back their demand … because of expectations of higher yields,” one dealer said, adding that those two sectors, which dominate the local bond market, subscribed for just N63.65 billion. Nigeria is planning for a budget deficit of N2.36 trillion this year as it tries to spend its way out of recession. It expects to raise funds from the local market to cover more than half the deficit. The DMO issues bonds every month.