Investors prefer longer-term government securities amid inflation concerns – CBN  

In the CBN’s second-quarter 2024 economic report, the apex bank noted a strong preference among investors for longer-dated securities over shorter-term options as a means to hedge against the ongoing surge in inflation.

The report read: “There was a preference for longer-tenured government securities, reflecting investors’ precautionary motive against rising inflation.” 

The report read, “Total NTBs offered, subscribed, and allotted across tenors (91-, 182- and 364-day) amounted to N1.47 trillion, N6.98 trillion and N2.81 trillion, respectively, compared with N2.21 trillion, N12.22 trillion, and N5.55 trillion, in the preceding quarter. 

“The lower amounts offered and subscribed were accompanied by increased stop rates on all the maturities to 18.47(±2.23) per cent, from 11.97(±9.23) per cent in the preceding quarter.” 

In the realm of Federal Government Bonds (FGN Bonds), the CBN’s report noted continued investor interest.

The government offered N1.35 trillion in bonds, and investors’ subscriptions exceeded this amount, reaching N1.78 trillion. Ultimately, N1.30 trillion was allotted, reflecting strong demand despite a reduction in the offer size from the first quarter’s N3.31 trillion.

Marginal rates for FGN Bonds were also adjusted upward, rising to 20.37% from 17.73% in the previous quarter. The adjustment in yields highlights an ongoing effort to attract investors who are looking to secure returns that can outpace inflation.

The report read: “FGN Bonds of various tranches were offered during the quarter under review. The amount offered, subscribed, and allotted were N1.35 trillion, N1.78 trillion, and N1.30 trillion, respectively, relative to N3.31 trillion, N2.39 trillion, and N1.16 trillion in Q12024. 

“The marginal rates at 20.37(±1.13) per cent, were higher than 17.73(±2.73) per cent in the preceding quarter, and the bid rates were 19.00(±5.00) per cent, against 20.50(±9.50) per cent in the previous quarter.” 

The report read: “Analysis of the open market operations showed that the total amount offered, subscribed, and allotted increased to N2.70 trillion, N4.94 trillion, and N4.36 trillion, respectively, from N1.45 trillion, N2.61 trillion, and N1.97 trillion in the preceding quarter. The increase in subscription was driven by the higher stop rates of 20.62(±1.88) per cent, from 15.75(±5.75) per cent.”