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DMO to raise $1.66billion in Q1 2015

By on January 15, 2015

In a bid to bridge the massive deficit in the 2015 budget, the Debt Management Office (DMO) has released its provisional bond issuance calendar for the first quarter of this year.

A review of the provisional bond issuance calendar showed that the DMO plans to raise (gross) between N215 billion ($1.17 billion) and N305 billion ($1.66 billion) from the sale of FGN bonds.

The calendar also showed that the debt office will still be selling the existing 10-year and 20-year benchmarks (14.20 per cent Mar ‘24s and 12.15 per cent Jul ‘34s) each month.

Additionally, the DMO is to launch a new five-year instrument in February in lieu of the current three-year paper (15.10 per cent Apr ‘17s).

Given the macro worries and the forthcoming elections due in February, analysts said the move to push out maturities was not a surprise.

According to analysts at FBN Capital,  the DMO has the unenviable task of issuing the calendar when there is no approved 2015 budget, and unlikely to be one until after the elections.

As a result, the analysts said the debt office’s funding targets therefore increase steadily throughout the quarter.

They pointed out that the DMO has a new challenge in that investor fatigue for auction participation has emerged.

According to the analysts, “In the last quarter of 2014 the DMO raised N182 billion and so undershot its target of between N195 billion and N285 billion it set out to raise. By way of explanation, we can point to sometimes compelling rates on money market instruments, the squeezing of banks via tighter monetary policy and the general macro worries prompted by pressure on the oil price and the naira.”

They added, “Our chart shows that bond yields have inched up towards the level before the JP Morgan moment in August 2012. The FGN’s budget proposals project a deficit of N755 billion for this year, and a contribution from net domestic borrowing (essentially the DMO) of N570 billion. We are not convinced that the government would be able to raise the balance from proposed sales of property, privatization, signature bonuses and drawings from the excess crude account.”

Consequently, they stressed that the debt office would probably need to set a higher target for the year.

 

[ThisDay]