Bonds oversubscribed as equities tumble

nse2The drop in equities listed on the Nigerian Stock Exchange and the resultant investor apathy has led to oversubscription of the Federal Government of Nigeria bonds since the beginning of this year.

Our correspondent gathered on Monday that many domestic investors were becoming weary of the tumbling stocks on the Exchange and were divesting heavily to the bonds market.

Financial experts noted that the interest in bonds by investors in the country had increased with time. They noted that the Debt Management Office had recorded successes at its previous debt auctions since January, adding that the slide in the stock market might continue moving investors to the bond market.

Reacting to the development, analysts at FBN Capital said, “Given the healthy appetite for FGN bonds by domestic institutions, the debt office should have little difficulty in meeting its issuance target.

“Debt sales by the office have been comfortably oversubscribed this year, on the back of ample yields and investor apathy towards equities.”

Our correspondent reported last Monday that the exit of foreign investors from the equities market, a wave of profit taking, as well as the depreciating value of the local currency had left stocks tumbling down.

The development had led to noticeable decline in indices at the NSE and had resulted into a decline of over N400bn, a development which analysts described as “unhealthy” for the stock market.

Meanwhile, it was learnt that the DMO would be holding its monthly auction of FGN bonds on June 27, and would be seeking to raise about N84bn ($525m) in its last auction of the quarter.

The debt office, analysts said, would be reopening two of its existing issues for interested bidders. The issues are its five-year April 17 and 10-year January 22.

“It will be seeking to test investor appetite for mid-term paper with a new seven-year issue (June 19),” FBN Capital said.

It added, “Given the successes recorded at the previous month’s auction with the five-year and 10-year issues, we see healthy demand for the June 19 paper. In terms of the direction of bond yields, our core view is that yields are likely to move down slightly.”

In his submission, the former President, Association of National Accountants of Nigeria, Dr. Samuel Nzekwe, told our correspondent that the dwindling local currency had negatively affected the stock market.

He observed that the desire for bonds by investors was largely due to the dwindling fortunes of the Exchange and called for government intervention through the Central Bank of Nigeria.

He said, “The bond market is thriving because the equities market has not fared well lately. We hope the government and its regulatory agencies can come up with measures that will remedy the falling local currency as this also has much impact on listed equities.”


Source: Punch/Okechukwu Nnodim

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