DMO opens FGN savings bonds for subscription while instrument closed mildly bearish on Tuesday

Charles Abuede

At the start of May, the debt management office (DMO) started offering a 2-Year federal government of Nigeria’s savings bond due May 12, 2023, and a 3-Year FGN Savings Bond due May 12, 2024, at an interest rate of 7.753 per cent per annum and 8.753 per cent per annum at N1,000 per unit, respectively.

According to details obtained from DMO’s website, investors are entitled to a minimum subscription of N5,000 and in multiples of N1,000 thereafter, and subject to a maximum subscription of N50 million. The bond auction is scheduled to open for subscription on May 3 to close on May 7, with settlement on May 12, 2021, with the coupon payment dates on August 12, November 12, February 12, May 12. Also, the interest will be paid quarterly, with a redemption bullet repayment on the date of maturity.

According to the debt management office, “They qualify as securities to which trustees can invest under the Trustee Investment Act. Qualify as government securities within the meaning of Company Income Tax Act and Personal Income Tax Act for tax exemption for pension, listed in the Nigerian Stock Exchange; and it qualifies as a liquidity ratio calculation for banks.”

Meanwhile, the sentiment in the FGN bonds secondary market was mildly bearish at the close of trading on Wednesday. Thus, the average bond yield across the curve cleared higher by 1 basis point to close at 8.75 per cent from 8.74 per cent on the previous day while the average yield across the long tenor of the curve expanded by 19 basis points.

However, the average yield across the short tenor of the curve declined by 1 basis point, and the average yield across the medium tenor of the curve remained unchanged. The FGN savings 10-APR-2022 bond was the best performer with a decrease in the yield of 6 basis points, while the 27-MAR-2035 maturity bond was the worst performer with an increase in the yield of 52 basis points.