By Dipo Olowookere
Wednesday’s bond auction by the Debt Management Office (DMO) on behalf of the Nigerian government fell below expectations as investors shunned the exercise to take positions in the relative liquid secondary market.
Reuters reports that the debt office had offered N135 billion worth of bonds maturing in 2021, 2027 and 2037, but only managed to raise N56.05 billion from the exercise.
A breakdown of the auction results revealed that the DMO sold N9.18 billion worth maturing in five years, N17.51 billion maturing in 10 years and N29.36 billion maturing in 20 years.
The debt office paid 16.80 percent for the 2021 and 2027 bonds and 16.90 percent for the 2037 debt.
According to auction results, investors demanded yields as high as 17 percent to help boost returns further above inflation, which was 16.1 percent in June.
One dealer was quoted by Reuters as saying that, “Pension funds and insurance firms cut back their demand … because of expectations of higher yields.”
The dealer added that those two sectors, which dominate the local bond market, subscribed for just N63.65 billion.
