The Federal Government’s (FG) bond that was auctioned in July has been oversubscribed by 201%. This was disclosed in a circular released by the Debt Management Office (DMO).
In view of the oversubscription, Nairametrics understands that investors have expressed their confidence in the outlets of the investment, as the Federal Government sought to raise N145 billion through its monthly offer of the FGN Bonds.
The offer: According to the DMO, the bonds were offered through three instruments with a total value of N145 billion for subscription to the investing public at its July 2019 FGN Bond Auction, which took place on Wednesday, July 24. After the auction, 298 Competitive Bids were recorded with a total value of N301.02 billion.
Allotments were made on successful bids at 13.35% for the five-year, 13.64% for the 10-year and 14.12% for the 30-year bonds. These were consistent with secondary market yields and represented a decline in the marginal rates, compared with those at the June 2019 FGN Bond Auction.
The total amount allotted for Competitive Bids was N86.82 billion from the total subscription of N301.02 billion, while the sum of N58.20 billion was allotted across the three tenors for Non-Competitive Bids at the same rates with the Competitive Bids.
Meanwhile, this development doesn’t mean that the amount oversubscribed will be taken, as only N145 billion will be taken from the N302 billion while others will be returned.
Understanding Bonds: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower.
Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.