Reuters reports the Debt Management Office (DMO) priced its 3-year government bond at 12.14% at Wednesday’s auction, up 102 basis points from the previous sale “to attract foreign investors unnerved by falling oil prices and a weakening naira”.
The Debt Management Office according to the article said on Friday that yields on its longer-term 10-year and 20-year government bonds were priced for sale at more than 30 basis points higher than at its last debt auction in September.
The article also quotes analysts as saying “foreign investors were not rolling over bonds at maturity….. Instead, they were sending their money abroad to safe havens as interest rates in the United States begin to normalise.”
It is important to note though that the DMO auctions its bonds and as such does not pre-determine its yields. The yields are determined via an auction by taking the lowest average yields investors are willing to accept for their bonds. Bond yields can rise (which means it cost the government to borrow more) when demand is low, the market is frantic or the country’s ratings are downgraded.
I suppose the Reuters article suggest the DMO may not have accepted the higher yields if it wasn’t for the mood of the world markets towards emerging market bonds and equities.
The CBN is also auctioning Treasury Bills next week and may see rates rise as well, if there are less buyers. Will they ‘dangle’ too?
See the full article in Reuters