The Debt Management Office said it raised N196.3 million through the first auction of the Federal Government Savings Bond issued in the second week of January. The auction results released yesterday show a decline in the level of subscription despite the higher rates when compared to the December 2017 auction.
The DMO had sold the two year bond at 12.098 per cent as against 11.738 per cent which it auctioned the two year bond in December last year. Likewise the coupon on the three year bond was higher at 13.098 per cent from 12.738 per cent in December 2017.
The auction result show that the DMO raised N73.05 million through the two year Jan 2020 paper in 121 successful bids and N123.25 million through the three year Jan 2021 paper with 178 successful bids.
Last month, the DMO had raised N50.25 million through the Dec 2019 paper and N196.16 million through the Dec 2020 paper. The DMO had last week raised N215 billion from the first monthly auction of FGN bonds of the year which was oversubscribed.
Analysts say while the DMO is running its auction programme without an approved budget by the federal government in place, “it is in a more comfortable place than 12 months ago. The marginal rates last week were slightly higher than the previous month at 13.38 per cent and 13.49 per cent for the five and 10-year benchmarks, compared with 13.19 per cent and 13.21 per cent.
“The decline in yields on FGN paper in the past four months amounts to +/- 350bps for the bonds and we doubt that this is reflected in the 2018 budget proposals, which have total debt service at N2.03trn excluding the sinking fund. We have estimated the average cost of federal government borrowing in naira last year at 15.5 per cent, based upon debt service for the first nine months” analysts at FBN Quest stated.
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