An Acceleration in Bond Issuance

Proshare

Monday, May 18, 2020 / 10:17 AM / By FBNQuest Research / Header Image Credit: Shutterstock

                                                                                  

Now that the National Assembly has approved the reallocation of deficit financing of N850bn for this year from the external to the domestic market, the DMO has revised its issuance calendar for Q2 2020. Its funding target for the year is now N1.60trn from the domestic market rather than the previous N750bn. The DMO has not changed the menu for this week's auction but in June it now seeks to raise between N135bn and N165bn, compared with the earlier N15bn to N45bn. The same five, 15 and 30-year benchmarks are on sale.


Proshare Nigeria Pvt. Ltd.

                                                                                                         

The DMO does have other debt products to offer investors but the reality is that the FGN bond market will provide the lion's share of the N1.60trn target.

 

Normally, such a large increase in supply feeds into returns. The FGN will surely be the loser. We should add that two programmes of securitization will add to the stock of tradeable FGN paper: the existing programme in which promissory notes totaling N970bn had been issued as at end-February, and a second programme proposed for the FGN's Ways and Means advances from the CBN.

 

In four months the DMO has raised about N820bn from the monthly auctions including non-competitive sales and has paid out about N600bn on the maturity of a bond in February. Even if we make a generous assumption about the funds the DMO can collect from marketing the likes of sukuk and green paper, we estimate that it will need to raise approaching N150bn per month for the rest of the year to hit its target.

 

 Sales and demand at FGN bond auctions (N bn)

Proshare Nigeria Pvt. Ltd.

 

Sources: Debt Management Office (DMO); FBNQuest Capital Research

 

 

The DMO no longer has an external funding target for this year. However, the FGN has sought concessional external funding of about N2.54trn equivalent, of which it has already banked N1.22trn from the IMF.


Proshare Nigeria Pvt. Ltd.

 

Related News

  1. FBNQ MB SPV Plc - NSE Lists Bonds
  2. USD and NGN FX Rates Breaches above N400 per Dollar I and E FX Window As Demand Piles up
  3. DMO Releases Revised FGN Bond Issuance Calendar, Raises N142.76Bn At NTB Auction
  4. DMO Publishes the Revised External and Domestic Borrowing Guidelines
  5. Treasury Bill Auction Holds On Wednesday May 13th, 2020
  6. Federal Budget: FGN Receives Legislative Okay For Revised Borrowing Plan
  7. Invest in FGN Monthly Bond Auction - May 2020
  8. Sub-Saharan Eurobonds Rallied Following Further Oil Production Cuts By Saudi Arabia
  9. Average Yield Marginally Sheds 4bps WoW on Skeletal Flows to the NT-Bills Space Amid Weak Sentiments
  10. Anchoria Fixed Income Monitor: FX Pressure Rebound as CBN Weakened Forward Rate
  11. Central Bank Of Nigeria Weakens Naira At The OTC FX Futures Market To Battle Dollar Scarcity
  12. Nigerian Eurobonds Sustain Rally Momentum As Global Oil Prices Continue To Gain
  13. United Capital Plc's Series 1 and Series 2 bonds Issuance Programme Is Coming Soon
  14. Naira Strengthens As Expectations For Improved Supply Calms The Market
  15. Weak Sentiments Dominate the NT-Bills Market Despite Improved System Liquidity
  16. CBN Sells N100bn At OMO Auction To Manage Excess System Liquidity
  17. Senate Gives Approval as DMO Switches Out N850bn External Borrowing Plans For Local Debt
  18. FG to Convert N850bn New External Borrowing in The 2020 Appropriation Act to Domestic Borrowing
  19. Anchoria Fixed Income Monitor: Investors' Appetite Remained Strong at Bond Auction
  20. A Highly Provisional Calendar from the DMO

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP