Investors have been demanding higher rates on borrowing instruments due to inflation rate surge and high interest rate environment. On Monday at the primary market auction conducted, debt Management Office offered higher spot rates on government bonds.
According to the statistics office, the inflation rate increased to 31.7% in February 2024 in a bid to tame consume price index from accelerating further, the monetary policy authority hiked interest rate by 4%.
Analysts said in response to a question on fixed income market outlook for the first half of 2024 and said It makes sense to pay higher on debt instruments due to changing market dynamics.
Some analyst projected, saying rates have not picked. The yield on fixed interest securities assets has remained elevated and a fresh uptick in headline inflation and hiked benchmark interest rate could drive further yield repricing.
According to CardinalStone Partners market update, at the bond auction, the DMO offered N459 billion across the standard maturities, which was met by a bid-to-offer ratio of 1.37x and a bid-to-cover ratio of 1.01x. The debt office offered N150 billion worth of 3-year bonds. The office allotted N151.928 billion versus a total subscription of N264.628 billion from market participants.
Its 7-year bonds were undersubscribed significantly, according to the auction results. The debt office offered N150 billion worth of 7-year bonds to investors but allotted N47.886 billion from a subscription of N51.786 billion received.
10-year FGN bonds received the highest subscription. The DMO offered N150 billion in bonds to investors. However, it received N298.60 billion subscription on the tenor and allotted N275.85 billion. Non-competitive allotment settled at N113.200 billion.
“Successful bids for the 19.94% FGN MAR 2027 (New Issue, 3-Year Bond); 18.50% FGN FEB 2031 (Re-opening, 7-Year Bond) & 19.00% FGN FEB 2034 (Re-opening, 10-Year Bond) were allotted at the Marginal Rates of 19.94%; 20.00% and 20.45%, respectively.
“However. the original coupon rates of 18.50% for the 18.50% FGN FEB 2031 and 19.00% for the 19.00% FGN FEB 2034 will be maintained”, DMO said in its auction results.
