FG to auction N100bn bonds June 26

The Debt Management Office has said the federal government will auction N100bn worth of bonds by subscription on June 26.

A circular by the DMO on Tuesday showed the breakdown of the figure to include a N30bn five-year reopening bond that would mature in April 2023 and be offered at 12.75 per cent; another N40bn 10-year reopening bond that would mature in April 2029 and be auctioned at 14.55 per cent; while N30bn 30-year bond would mature in April 2049 and be auctioned at 14.8 per cent.

According to the DMO, the auction date is June 26, while the settlement date is June 28.

Recall that the Federal Government’s bond for the month of May worth N100bn was oversubscribed by over N171.11bn.

Recent trends in the FGN bonds also showed that investors had a preference for long term bonds.

Total bids received from investors for the May bond was N271.11bn.

The DMO had stated that the trend of oversubscription at the FGN bond auctions for the year continued, after the three instruments for five, 10 and 30-year tenors, of N35, N35 and N30bn respectively.

As of May 2019 when the last FGN bond was auctioned, the DMO offered three instruments for five, 10 and 30-year tenors to the investing public, with a total amount offered of N100bn.

As with the April auction when the 30-year bond was first offered to the market, investors showed stronger demand for the 30-year bond with a subscription of over N100bn compared to the N30bn offered.

“This clearly indicates that the DMO understands the needs and preferences of investors in terms of tenor, which informed its introduction of the 30-year bond,” the DMO stated.

The five and 10-year instruments were equally oversubscribed, with the subscription of N45.98bn and N124.22bn respectively, compared to the N35bn offered for each of the instruments.

The 30-year instrument at N30bn had N100.91bn subscription.

In addition to the strong demand, interest rates demanded by investors also significantly declined for all the instruments compared to the April 2019 auction.