Wednesday, February 13, 2013

The Sun News FG accounts for 62.4% of domestic debt ? DMO

?As CBN auctions $180m at forex market


The Debt Management Office (DMO) has disclosed that Federal Government?s bonds accounted for 62.4 per cent of its domestic debt stock at end ? 2012. The share of the bonds in the stock changed from the 63.7 per cent registered for December 2010.

According to data from the DMO appetite of off-shore investors for the bonds might now be tapering off, given the profits already booked from the yield compression of more than 500bps, since August 2012. Yet the domestic banks may still prefer the comfort and security of holding the bonds to the risk (and higher returns) of lending to the real economy.

It would be recalled that a Central Bank of Nigeria?s circular dated 31 January confirmed that investments in FGN bonds would remain zero risk-weighted. The debt stock of a sovereign has to be viewed in conjunction with the maturity profile, which is healthy in Nigeria?s case.

The DMO has issued out to 20 years, and is to test the appetite for the long bond when it reopens the ?July 30s at auction this week for the first time since November 2010. The data further indicated that federal government also enjoys strong demand for its National Treasury Bills. Meanwhile, a Circular with ref FMD/FED/CIR/GEN/01/082/10 released on its website showed that CBN intervened with an offer of $180million for sale of foreign exchange auction for this week. However, it was revealed that yields are rising on Nigeria?s and Tanzania?s Treasury Bills (TBs), although demand has continued to be strong, according to data posted on the websites of both countries? Central Bank.

The average yield-to-maturity for Tanzania was 13.43 per cent on the 364-days bills, 12.86 per cent on the 182-days paper, 11.76 per cent on 91-days and 7.25per cent on 35 days. For Nigeria, it is 12.5 per cent on the 364-days bills, 11.75 per cent on the 182-days paper, 11.6 per cent on 91-days.

The main investors in government securities in both markets are pension Funds and commercial banks who took more than 60 per cent of the market, followed by insurance funds and a few micro-finance institutions. Treasury bills are issued regularly as part of monetary control measures to help lenders manage their liquidity.

T-bill is issued through a competitive bidding process are used by the Central Banks to control liquidity in the financial system. It is a short-term debt obligation backed by the government with a maturity of less than one year. The CBN?s auction last week attracted a total bid in excess of N500bn, including more than N300bn for the 364-day paper.


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