Investors Oversubscribe For March FGN Bonds Despite Lower Rate

• Investors Oversubscribe For March FGN Bonds Despite Lower Rate

Investors oversubscribed for the Federal Government Bonds offered for March 2019 by N140 billion, according to the Debt Management Office.

The DMO received a total subscription of N240 billion against N100 billion bonds it offered despite the new interest rate.

The Central Bank of Nigeria led Monetary Policy Committee lowered interest rate by 50 basis points to 13.5 percent for the first time in over 3 years on Tuesday, citing improved oil outlook and the need to stimulate economic growth.

Still, investors appear to prefer the fixed income market to the uncertainty rocking the Nigerian Stock Exchange market this year and are likely anticipating a future increase in interest rate.

This is because oil production cap and a positive trade agreement could disrupt CBN policy going forward and hurt expected foreign direct investment as foreign investors are more likely to hold back once the U.S. and China resolved their trade issues.

The DMO said, “The FGN Bond auction for March 2019 conducted on Wednesday at which N100bn bonds were offered was oversubscribed just as in the auctions for January and February.

“We offered three instruments at the auction for three, seven and 10-year tenors and subscriptions for the three instruments was in excess of N148bn for competitive bids. Non-competitive bids valued at N92.6bn were also received, taking the total subscriptions across the three tenors to over N240.6bn.”

It added, “The trend of investors’ preference for the longer tenured instrument continued, with the 10-year bond significantly oversubscribed with a bid-to-cover ratio above five.”

“Allotments were made to successful bidders at the rates of 13.5 per cent for the five-year, 13.5 per cent for the seven-year and 13.5 per cent for the 10-year bonds, which are considerably lower than the allotment rates for the February 2019 auction.”

The DMO said that total amount allotted to both competitive and non-competitive bids for the three instruments was N121.95bn.