Investors Gear up for DMO’s N150bn Bond Sale on Wednesday

By Modupe Gbadeyanka

On Wednesday, September 23, 2020, the Debt Management Office (DMO) will auction bonds worth N150 billion to investors.

Already, feelers from the debt market showed that traders are gearing up for this and as it has happened in the previous exercises, the debt instruments are expected to be oversubscribed.

At tomorrow’s bond sale, the managers of Nigeria’s debt profile will be offering N150 billion papers across four tenors; 10 years, 15 years, 25 years and 30 years, all re-opening.

For the 10-year 12.50% FGN JAN 2026 instrument, the DMO is offering N25 billion, while for the 15-year 12.50% FGN MAR 2035 note, it is offering N40 billion, with N45 billion worth of the 25-year 9.80% FGN JUL 2045 to be auctioned and N40 billion worth of the 30-year 12.98% FGN APR 2050 to be offered.

As earlier stated, these bonds are expected to be oversubscribed because of the high level of liquidity in the financial system at the moment.

Some investors are scouting for investment tools in the capital market to tie their funds to and the local debt securities provide such a huge opportunity.

This is anticipated to cause a slight decline in the coupon rate tomorrow as witnessed in the fixed income space in recent times, where rates have dropped from double-digits to single despite the spike in the inflation rate.

According to the National Bureau of Statistics (NBS), the inflation rate in August increased by 13.22 per cent year-on-year, making an investment of less than 14 per cent almost meaningless.

However, some investors in Nigeria are not bothered about this at the moment and would be glad to dump their funds in any financial tool that can even yield less than 2 per cent.

This has been the case in the treasury bills space, where the Central Bank of Nigeria (CBN) recently auctioned the three-month tenor at 1.09 per cent per annum.

The banking industry regulator also recently directed commercial banks to pay an interest rate of 1.25 per cent per annum on savings deposit.

This, it explained, is to discourage the keeping of money in the banks instead of spending them to boost economic activities in the country.