The Debt Management Office (DMO) released the offer circular for the August auction of the Federal Government Savings Bond with the two and three year bonds offered at higher interest rates than what was offered in July.
In the offer circular, the DMO said it would be raising the 2-Year bond at 10.668 per cent, while the 3-Year bond would be at 11.668 per cent. In July, the debt office had raised N79.985 million through the 2-Year bond at 10.483 per cent, while N263.065 million was raised through the 3-Year bond at 11.483 percent.
The bond sale which opened Monday August 6, 2018 is to run till Friday August 10, while settlement date was set at August 15. Cumulatively, the DMO has so far raised N1.66 billion through the savings bond since the beginning of the year up until last month. Investors’ interest in the FGN Savings Bond has been on the decline as the amount raised through the bond between January and June 2018 stood at N1.32 billion as against N4.75 billion that was raised between March and June 2017.
Meanwhile the liquidity is expected to improve this week as an inflow of N452 billion from Open Market Operations (OMO) is expected to hit the system by Thursday this week. Traders in the money market said they expect the Central Bank of Nigeria (CBN) to conduct more frequent OMO auctions to mop up excess liquidity.
The CBN last week in a bid to mop up excess system liquidity had conducted an OMO auction offering N600 billion broken into N200 billion and N400 billion for the 91 and 203-day maturities respectively.
The shorter tenor was 29.5 per cent subscribed, while the longer tenor was 76 per cent subscribed as more investors positioned at the longer end.
At the primary market auction last week, the apex bank offered N215.6 billion and investors exhibited a bullish sentiment as all instruments were oversubscribed particularly the 364-day instrument which was 1.8 times oversubscribed reflecting investors’ preference to lock in funds at the longer end of the curve.
On the back of the oversubscription, the stop rates at the auction were 10, 10.4 and 11.3 percent for the 91, 182 and 364-day instruments respectively.