Investors Inject N126bn into FGN Bonds


By Emele Onu, 08.20.2010 


Investors injected N126.46 billion in the 20-year, 5-year and 3-year sovereign bonds at the eighth debt auction for the year, by the Debt Management Office (DMO).  According to the details of the transactions released by the DMO yesterday, it sold at the auction that took place the previous day N41.64 billion in the 20-year paper, N42.33 billion in the 5-year bonds and N42.49 billion in the 3-year instruments.


The DMO stated that the amount raised was 20 per cent more than the N105 billion it proposed to auction to buyers.Market analysts said the marginal rate on the 3-year bonds rose slightly to 7.54 per cent from 7.48 per cent last month.


The 5-year paper was up to 9.25 per cent from 8.85 per cent and the 20-year bonds increased to 11 per cent from 10 per cent. All the instruments at the auction were re-openings of previous issues. However, the DMO disclosed that the original coupon rates of 5.50 per cent, 4 per cent and 10 per cent for the 3-year, 5-year and 20-year bonds respectively would be maintained. The total subscription at the auction stood at N202.86 billion, compared to N211.62 billion in July this year.


Dealers said the high interest in the bond instruments was a result of the release of huge budgetary allocations to the three tiers of government last week, which raised market liquidity. The federation accounts and allocations committee (FAAC) had released  about N704 billion in budgetary allocations to the federal, states and local governments.


In a related development, the Central Bank of Nigeria (CBN) announced yesterday that it would issue N44.45 billion in 91-day and 182-day treasury bills instrument next Wednesday.  The monetary authority said it would issue N14.45 billion in 91-day bills and N30 billion in the 182-day instruments using the Dutch Auction system (DAS).The CBN further pointed out that the amount on offer could vary in line with market conditions at the time of the auction.


The CBN issues treasury bills as part of its open market operations (OMO). The OMO is deployed for monetary control purposes – checking the level of liquidity in the system and also for influencing the price system, among others.





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