FG plans N95bn bond auction today

The Federal Government plans to sell N95 billion of bonds today, the Debt Management Office, DMO, has said.

Data obtained from the DMO said it would sell N35 billion of a bond maturing in 2036, N25 billion of paper maturing in 2026 and N35 billion of debt maturing in 2021, using the Dutch auction system.

Results of the auction are expected to be released Thursday. All the bonds on offer are reopenings of previous issues.

Yields in the secondary market in the last one week have slightly inched upward.

Analysts at Capital Bancorp noted that due to current market conditions, yields at the primary auction may close around the current yields in the market.

“Following the above, the yields at which Capital Bancorp will bid at this auction through a licenced Primary Dealer and Market Maker, PDMM, are 14.5 per cent, 15 per cent and 15 per cent respectively.

The country issues sovereign bonds monthly to support the local bond market create a benchmark for corporate issuance and fund its budget deficit.

The government plans to borrow about N900 billion locally to finance part of the N2.2 trillion deficit in its 2016 budget. It is also seeking advisers and bookrunners to manage a planned $1 billion Eurobond sale this year.

However, the overnight lending rate rose to 22 percent on Friday from 13 per cent last week due to tight liquidity worsened by banks inability to get access to their balances with the regulator.

The banks were demanding as high as 25 per cent to place funds on the market overnight and that a technical glitch at the central bank’s system which started last month had not been resolved.

“There was no cash flow to the system this week because of no treasury maturity,” one trader said.

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