Nigeria bond auction raises N80bn, 20% less amount on offer

Nigeria raised N79.62 billion ($260.20 million) at an auction of government bonds Wednesday, which is less than it originally planned after it got fewer subscriptions for the most liquid five-year debt, traders said on Thursday.

The Debt Management Office (DMO) specifically sold N27.18 billion in five-year bonds at 13.70 percent and N52.44 billion in 10-year debt at 13.98 percent. The five-year bond is due in 2021, the 10-year, a new offering, in 2028.

The bond market, which traded on a slightly bearish note, had yields rising by 0.09 percent on average as market players sold off some positions in anticipation of slightly higher clearing rates at the bond auction.

The Debt Management Office (DMO) had intended to raise N100 billion. It, however, got subscriptions of N117.58 billion with more than half skewed towards the 10-year bond as most investors bid as high as 16 percent for the bonds at the auction.

With the results, analysts are expecting a slight uptick in bond yields going forward due to the relatively weak demand at the auction, which cleared at 13.70 percent and 13.98 percent on the 2021 and 2028 bonds respectively.

At the treasury bills segment of the fixed income market, trade was bullish with yields declining further by c.15ps on average with significant client interests on the 22-Mar, 19-Apr, and 31-Jan bills.

The bullish sentiments have been largely driven by the continued hold on OMO issuance by the CBN. Some market players also tried to take positions in anticipation of OMO maturity inflows Thursday. Barring resumption in OMO issuance, yields are likely to maintain a downward trend.

The Nigerian government has been working to lower its borrowing costs, particularly as inflation fell for the 12th time in a row in January. It sold Eurobonds last Thursday to help repay some treasury bills rather than rolling them over as it has done in the past.

Investors are waiting for the debt office to announce which bills it intends to pay off and a reduction in auction volumes for the second quarter, which could spur buying.

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