DMO Bond Records N12.23 Bn Over-Subscription

Debt Management Office (DMO) has said that the ten-year Federal Government Bond worth N20 billion issued in May, 2008 was over subscribed with N12.23 billion.

A statement by Mr. Joseph Inokotong, DMO communications adviser, said investors, both local and foreign have continued to yearn for long-tenured instruments as exemplified in the oversubscription of the 10-year FGN Bond issued last Wednesday, July 23, 2008.

He said the Debt Management Office (DMO) issuances of 3-year and 10-year FGN Bond worth N25 billion and N20 billion respectively were oversubscribed.

Inokotong cited that the 10-year bond which was a re-opening of the May 2008 offer attracted a total number of 92 bids, amounting to N32.23 billion, indicating an oversubscription of N12.23 billion, and representing 61.15%. 26 bids were successful.

The range of bids varied from 9.20% – 20%, and a total of N9.82 billion was sold at the cut-off rate of 12.75%.

In the same vein, he said "the market responded positively to the N25 billion 3-year offer as 96 bids was received, summing up to N31.32 billion. This figure reflects an oversubscription of N6.32 billion, representing 25.28%. Bid rates varied between 7.50% and 13.50%, while 44 bids amounting to N15.82 billion were successful at the cut-off rate of 10.50%.

"Following these results, the coupon rate for the 3-year bond is set at 10.50%, while for the 10-year, 10.70% will be maintained.

"The high level of subscriptions received for the two tenors that were offered shows investors’ confidence in the bonds as a safe and liquid investment.

"The bid rates received at the auction were most probably due to the volatility and high interest rates witnessed in the money market in recent times. Bonds, however, are widely accepted as relatively more stable instruments, in terms of yields and prices because of their long tenors".