FG Bond Face Investors Rejection

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CEM REPORT | Patronage for Federal Government Savings Bond by investors has dropped by 27 percent following the recent reduction in interest rate by the Debt Management Office, (DMO) by 13 basis points, (bpts).

The Debt Management Agency had slashed the average interest rates on the FGN Savings Bonds, (FSBs), to  8.58 percent at the July auction from 8.71 per cent at the June auction.

Similarly, the interest rate on the 2-yr and 3-year FSBs reduced by 13 bpts to 8.075 percent and 9.075 percent respectively in July from 8.205 per cent and 9.205 per cent in June.

Investors’ reaction to the reduction is a fall in total allotment to N1.37 trillion from N1.87 trillion in June indicating a 27 percent rejection of the cut.

Furthermore, the 2-year FSB recorded the largest decline of 41 per cent, as allotment fell to N451 billion in July from N769.9  billion in June. The 3-year FSB recorded a 17 per cent decline to N915.86 billion in July from N1.1 trillion in June.

Recall a CEM report of the FGN Savings Bonds, FSBs, introduced by the Debt Management Office, DMO, on behalf of the Federal Government, as a retail savings product accessible to all income groups.

The DMO, said it introduced the Bond to deepen the national savings culture and diversify funding sources for the Government.

The FSBs are issued monthly in tenors of 2 and 3 years on a minimum subscription of N5,000 with additions in multiples of N1,000, subject to a maximum of N50 Million. The FSBs are issued at an interest rate indicated in the offer announcement and interest is paid quarterly to investors.

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