FG’s 30-year debt oversubscribed more than 300% as investors gets juicy yield

Enticing juicy yield offered by the Federal Government (FG)’s bond saw investors falling over themselves to grab the offer, which was oversubscribed by over 300 per cent. Investors say, the yield offered by the FG’s 30-year debt is a record one.
The 2053-dated debt attracted total subscriptions of N330 billion ($364 million), compared with the N90 billion of paper put on offer by the nation’s Debt Management Office. Other shorter tenor notes, including the 2029, 2033 and 2038 maturities, were all undersubscribed at the same auction, indicating a preference for the longer-dated debt, which was also offered at a record yield of 18 per cent.
Analysts say, the enthusiastic response towards the 30-year bonds starkly contrasts with the tepid interest in shorter tenor notes.
Bonds maturing in 2029, 2033, and 2038 garnered significantly less investor interest at the same auction, with the 2029 bonds raising only N34.7 billion against a target of N90 billion, and the 2033 and 2038 bonds attracting N33 billion and N47 billion, respectively, both falling short of their N90 billion goals.
Why the mixed results: Analysts speaking to Nairametrics shed light on this trend, explaining that the preference for longer-term bonds stems from their yields being perceived as higher than the long-term inflation projections, which are estimated to be between 12-13 per cent.
This rationale highlights a strategic shift among investors, who are opting for securities that promise returns exceeding the anticipated inflation rates over an extended period.
The high demand for the 30-year bonds, offering a coupon rate of 15.70 per cent, resulted in 206 successful bids from a total of 211, with interest rates ranging from 15.70 per cent to 20.0 per cent, leading to a record yield of 18 per cent.
This robust performance, however, unfolds against a backdrop of escalating inflation concerns in Nigeria, which according to the Nationa Bureau of Statistics rose to 27.33 per cent in October.
The divergence in the bond market responses underscores the complex economic landscape in Nigeria. While the strong uptake of the 30-year bonds indicates confidence in the country’s long-term economic prospects, the underperformance of the shorter-tenor bonds and the high inflation rate paint a more nuanced picture of investor sentiment and economic stability.
For investors, these market dynamics signal the importance of a strategic approach, balancing the allure of high yields against Nigeria’s macroeconomic conditions. The upcoming inflation data will be key in shaping future market trends and investment decisions.
Optics: As the Nigerian government and the DMO navigate these economic challenges, their strategies for managing the bond market and broader fiscal policies will be closely watched.
Their success in maintaining investor confidence and stabilizing the financial market will be pivotal in steering the country through these turbulent economic times.

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