Stop rates to increase despite N377.44bn maturities

THERE are expectations that stop rates of new issuances will increase in the new week, as Treasury-bills worth N377.44 billion which will mature via the primary and secondary markets will more than offset

the T-bills worth N187.29 billion which will be auctioned by CBN via the primary market; viz: 91-day bills worth N7.5 billion, 182-day bills worth N54.92 billion and 364-day bills worth N125.20 billion, dealers from Cowry Assets Management Limited have said.

Meanwhile, the Debt Management Office (DMO) held its latest monthly auction of Federal Government of Nigeria (FGN) bonds on Wednesday.

It offered N150 billion, raised N122 billion ($310 million) and attracted a total bid of N238 billion. The marginal rates on the reopened 15- and 25-year benchmarks rose for the second month, by 180 basis points (bps) and 195bps, respectively.

The DMO also reopened the 10-year benchmark, which it had not sold for over one year. Analysts say that by accepting fewer bids, the DMO would have set lower marginal rates.

However, the FGN has a large borrowing programme ahead of it this year, not least because of the additional hit to revenue collection as a result of the Covid-19 virus. In the secondary market, FGN bond yields have been rising since the start of the year. This was the background to the first auction of 2021, along with the sense that the DMO would front-load its issuance.

“When we add sales on a non-competitive basis to public bodies, the DMO raised N170 billion from the auction this week.

Available records show that the approved 2021 budget provides for issuance totalling N4.68 trillion by the DMO, and that the domestic/external split is set at 50/50.

“When we recall that it raised N1.66 trillion (gross) last year from sales of FGN bonds (Good Morning Nigeria, 19 January 2021), we can see that the reported domestic funding target for this year is highly challenging. The DMO collects smaller sums from the issuance of other debt instruments such as N163 billion from a sale of sukuk in H1 2020 but its attainment of its target hinges upon the FGN bond auctions,” dealers from FBNQuest wrote in a note to clients.

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