The federal government successfully raised N55.67 billion, about $354 million in 3-, 5- and 10-year sovereign bonds on Wednesday, at its tenth monthly debt auction of the year, the Debt Management Office (DMO) said yesterday.
A debt security issued by a national government within a given country and denominated in a foreign currency. The foreign currency used will most likely be a hard currency, and may represent significantly more risk to the bondholder.
The government of a country with an unstable economy will tend to denominate its bonds in the currency of a country with a stable economy. Because of default risk, sovereign bonds tend to be offered at a discount.
The Nigerian sovereign bond may have become more attractive to foreign investors because of the high yield (interest rate) it attracts. Yields on the instruments broadly rose to reflect the hike in the Central Bank of Nigerias benchmark interest rate by 275 basis points to 12 per cent at the last Monday policy committee meeting.
The debt office sold N8.0 billion of the 3-year, N17.67 billion of 5-year and N30 billion of 10-year papers, due to mature in 2014, 2015 and 2018 respectively. All the papers were re-openings of previous issues.
The 3-year paper was issued at a marginal rate of 15.50 percent, up from 10.50 percent last month, while the 5-year instruments were allotted at 15.30 percent against 11.25 percent previously and the 10-year papers were allotted at a marginal rate of 18.0 percent compared to 11.49 percent at the previous auction.