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Yields on domestic bonds spike after DMO raises N274 bln debt at domestic auction

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By Oludare Mayowa

Nigeria sold a total of N157.95 billion bonds at an auction on Wednesday and allocated an additional N116.50 billion on a non-competitive basis to mandate holders, the Debt Management Office (DMO) said.

The huge debt issued by the debt office at the auction also came at a higher cost to the treasury as yields rose across the board.

The debt office sold a total of N112.78 billion of the 15-year bond at 13.34 percent, higher than 10.50 percent the same tenor paper attracted at the last month’s auction.

A total of N96.20 billion of the 25-year tenor debt was sold at 13.85 percent rate compared with 12 percent yield at the last auction.

Also, the debt office sold N65.47 billion worth of the 10-year paper at 12.25 percent against 10.50 percent it was sold at the last month’s auction.

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The debt office allocated N74 billion of the 15-year paper and N42.50 billion of the 10-year debt on non-competitive basis to mandate holders such as government institutions that hold statutory assets in bonds, pushing the total debt raised on Wednesday to N274.45 billion.

Subscription total N265.68 billion at the auction, with demand for the 25-year paper heavier at N174.86 billion.

The debt office had set out to raise N150 billion at the auction but ended up raising more as the increase in marginal rate lured more investors to the market.

Analysts, however, said that in spite of the higher returns on the sovereign debt, yields on Nigerian fixed income assets are still far below the prevailing inflation rate, signifying negative returns on investment in that segment of the market.

The National Bureau of Statistics (NBS) last week reported a March inflation rate at 18.17 percent, up from 17.33 percent in the previous month.

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