Investors Shun FG’s Bond Auction as Yields Drop

• Investors Shun FG’s Bond Auction as Yields Drop

Investors in the country’s bond market, on Wednesday, shunned the Federal Government’s bond auction owing to falling yields.

The country raised only N56.05bn ($179m) in the bond auction, which was less than half the amount on offer as domestic pension funds and insurance firms cut orders due to low yields, traders said on Thursday.

The Debt Management Office offered N135bn worth of bonds maturing in 2021, 2027 and 2037, but investors shunned the auction to take positions in the relative liquid secondary market.

The DMO paid 16.80 per cent for the 2021 and 2027 bonds and 16.90 per cent for the 2037 debt. Investors demanded yields as high as 17 per cent, auction results showed, to help boost returns further above inflation, which was 16.1 per cent in June.

“Pension funds and insurance firms cut back their demand because of expectations of higher yields,” one dealer said, adding that those two sectors, which dominate the local bond market, subscribed for just N63.65bn.