DMO Sells N60 Billion Bonds (allAfrica.com)

The Debt Management Office (DMO) sold bonds worth a total of N60 billion at lower yields on all tenors at an auction on Wednesday.

The debt office said in a statement that investors submitted total bids of N183.34 billion compared with N184.72 billion at the last auction.

The lower yields, according to Reuters, reflected the trend in the secondary market, which remain at below 14 per cent following a sharp rise immediately after Nigeria’s peaceful elections in March.

The 5-year, 10-year and 20-year tenors each received a total of N20 billion, the debt office said.

The 5-year paper was sold at 13.84 percent, lower than 14.44 percent the debt attracted at the last month’s auction.

The 10-year bond fetched a yield of 13.48 percent against 14.22 percent last month, while the 20-year debt attracted a yield of 13.88 percent compared with 14.45 percent last month.

Meanwhile, Reuters reported yesterday that the Jeddah-based Islamic Development Bank (IDB) has no immediate plans to issue short-term sukuk (Islamic bonds), leaving it to domestic and regional issuers to meet growing demand for liquidity management tools in the sector.

A lack of sharia-compliant paper has been a major constraint for the development of Islamic finance, with the tools needed to help Islamic banks meet tough Basel III regulatory standards being phased in very gradually. Last year, the IDB said it aimed to issue its first short-term sukuk in 2014, adding to wider efforts to develop high-quality liquid assets (HQLAs) for Islamic banks to use, but at this stage such a programme is not planned.

“IDB in principle supports the establishment of the short-term sukuk programme but for the time being we are not considering any issuance,” IDB President Ahmad Mohamed Ali told Reuters.

The AAA-rated IDB priced a $1 billion five-year sukuk in February and Ali said that next year’s issue would be similar, as the IDB focuses on infrastructure financing.

In the meantime, domestic regulators including Bahrain and the United Arab Emirates have expanded their Islamic liquidity tools in recent months.

The Malaysia-based International Islamic Liquidity Management Corp (IILM), backed by nine central banks and monetary agencies as well as the IDB, has also tried to fill the gap with issuance of three-month and six-month sukuk. But there are concerns that such tools could be insufficient in times of market stress, when they are needed most.

“A key issue is the absence of secondary markets that provide a proven record of being a reliable source of liquidity at all times”, Kuwait central bank governor Mohammad al-Hashel had said.