FG rakes in N7.3bn from savings bond

The Federal Government raised a total of N7.3bn from the FGN Savings Bond in 2017, the Debt Management Office data showed on Tuesday. The savings bond programme, which was introduced in March 2017 to boost domestic investors participation in the bond market, has been for 10 months now.

The Federal Government was planning to use proceeds of the savings bond to finance the 2017 budget deficit but investor appetite for the bond diminished in the fourth quarter. The December allotment figures showed that N246.41m was raised, the lowest figure for the year. According to the DMO data, the coupon rate allocated were 11.738 per cent for FGNSB DEC 2019, a two-year bond and 12.738 per cent for FGNSB DEC 2020, a three-year bond. For November allotment, the figures shows that N256m has been raised through the 12.091 per cent (FGNSB NOV 2019) two-year bond and 13.091 per cent (FGNSB NOV 2020) three-year bond.

Subscription in November was the second lowest as investors appetite started dropping. Before November and December, the average coupon rate on the FGN saving bond was pegged at an average of 12 per cent and 13 per cent for the two-year and three -year bond. In October, the saving bond allotment dropped by 5.6 per cent to N389.19m from N412.7m following the slowdown in coupon rates. The coupon rate assigned to the FGNSB OCT 2019 and FGNSB OCT 2020 in October was at 12.059 per cent and 13.059 per cent, respectively, while in September, the coupon rate was at 13.817 per cent (FGNSB SEP 2019) and 14.817 per cent (FGNSB SEP 2020)respectively.

Before the last quarter of 2017, there was increased participation at the debt market in the first quarter as demand for T- Bills, FGN Bonds and the Savings bond increased relative to supply Specifically, in March the debt office had raised N2.068bn from the 13.01 per cent two year debt with 2,575 total number of successful subscriptions.

The DMO data showed that the initial auction of the FGN Savings Bond had the largest participation in the first quarter and started dropping in the second and third quarters. At the end of first quarter, in April, the DMO raised N1,288.02bn that comprises of N419.33m and N868.69m for a 12.794 per cent and 13.794 per cent, two- year and three-year savings bond, respectively.

In May it raised N791.15bn with yields rising to 13.189 per cent for the two-year paper and 14.189 per cent for the three-year allotment. The yield remained the same in June but the amount raised dropped to N607.26m. However, an increased yield failed to spike interest in July as only N400.57m was raised from the two-year and three-year paper although the yield for the papers were raised to 13.386 and 14.836 per cent respectively.

(Punch)