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Debt management office

Nigeria sells N50 bln domestic bond at lower yields as demand surges

By on October 21, 2020 0 116 Views

By Oludare Mayowa

Nigeria sold a total of N50 billion worth in domestic bond at an auction on Wednesday as yields on the soverign debt instrument continue to decline compared with the rate the paper was issued at the previous auction.

Yields on the paper were down more than 300 percentage points on the 15-year debt and 290 percentage points on the 25-year bond.

The Debt Management Office (DMO) sold N22.5 billion worth of the 15-year bond at 4.97 percent, with N20 billion at the auction and N2.5 billion alloted to non-competitive bidders. the 15-year paper attracted 8.52 percent yield at the previous auction in September.

The debt office sold N27.5 billion worth in the 25-year debt at 6 percent against 8.90 percent at the previous auction. The debt office sold N25 billion at the auction and alloted N2.5 billion to non-competitve bidders.

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Investors demanded a total of NN235.87 billion worth of the paper at the auction as surge in liqudity in the money market deove demand at the debt auction.

Last month, the Central Bank of Nigeria (CBN) slashed its benchmark interest rate by 100 basis points to 11.5 percent, the first of such rate cut since May, citing the need to force banks to increase lending to the economy.

At the last month’s debt auction, the DMO sold a total of N106.15 billion across four tenors, short of the N145 billion initially offered by the debt office and far below the amount demanded by investors.

The DMO has reduced supply significantly by 79.31 percent against N115 billion offereed at the previous auction.

Analysts said supply at the monthly FGN bond auction will be low for the rest of the year as the DMO has already raised 95 percent (excluding non-competitive bids) of its domestic funding target of N1.60 trillion.

Last month, the DMO said it has borrowed N1.72 trillion through domestic debt issuance at its monthly auction in the first nine months of the year in a bid to plug Nigeria’s 2020 budget deficit.

The debt office has also deployed about N600 billion of the amount raised to service previous bonds issued through the domestic debt auction.

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