Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday,
March 23, 2020 /2:01 PM / by Afrinvest Research / Header
Image Credit: Smallmouth
Sequel
to the release of the February inflation data by the National Bureau of
Statistics in which inflation rose to 12.2% Y-o-Y, performance in the Nigerian
Treasury Bills ("NT-Bills") secondary market last week was largely mixed
with mild buying interests observed on the mid tenor instruments while the long
end of the yield curve witnessed slight sell-offs. Although the Federation
Accounts Allocation Committee ("FAAC") didn't disburse its scheduled
allocation for February, system liquidity remained buoyant (c. N467.0bn
as at Friday) following inflows from OMO maturities on Thursday (N344.5bn).
Notwithstanding, trading activities continued relatively quiet as investors
traded cautiously in search of alternative investments with higher yields
amidst the Primary Market Auction ("PMA"). Thus, average yield
across all tenors rose from 3.9% to 4.0% W-o-W with most sell-offs skewed to
the 15-Oct-20 (+121bps), 01-Oct-20 (+103bps) and 17-Sep-20 (+84bps) maturities.
At
the PMA on Wednesday, the CBN offered N47.0bn worth of T-Bills as
against the N128.7bn total subscription, translating to a bid to cover
ratio of 2.7x (Vs. 2.8 x at the previous auction). All tenors witnessed an
oversubscription with the 91-day instrument enjoying the most interest. Thus,
stop rates cleared lower at 2.3%, 3.4% and 4.6% for the short, medium- and
long-term maturities respectively.
Please see a detailed summary of the PMA auction in the table below:
Auction Date |
18-Mar-20 |
18-Mar-20 |
18-Mar-20 |
Allotment / Issue Date |
19-Mar-20 |
19-Mar-20 |
19-Mar-20 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount ( |
2,000,000,000 |
8,385,196,000 |
37,176,061,000 |
Total Subscription ( |
8,947,177,000 |
27,356,003,000 |
92,367,822,000 |
Allotment ( |
2,000,000,000 |
8,385,196,000 |
37,176,061,000 |
Range of Bid Rates (%) |
2.0000 - 5.2500 |
3.0000 - 7.35000 |
4.3300 - 13.1800 |
Stop Rates (%) |
2.3000 |
3.4000 |
4.6000 |
Previous Stop Rates (%) |
2.4900 |
3.7800 |
5.3000 |
Bid-to-Cover Ratio |
4.5x |
3.3x |
2.5x |
Allotment Ratio |
0.2x |
0.3x |
0.4x |
Furthermore,
the Apex bank conducted an OMO auction on Thursday offering a total of N150.0bn
across the 89-, 180- and 362-day tenors. However, total subscription levels
were scanty (c.0.1x) and the CBN did not allot any instrument due to
unattractive bids from investors.
Going
into this week, we expect inflows from maturing OMO bills worth N76.2bn
to further bolster liquidity. More so, the Monetary Policy Committee ("MPC")
is scheduled to meet today and tomorrow to determine the Monetary Policy
Rate. Following the COVID-19 outbreak amid dwindling oil prices, we expect
the MPC to adopt a dovish stance in a bid to stimulate growth. However, we do
not rule out the possibility of the CBN sustaining its unorthodox policy
measures.
Investors
are thus advised to trade cautiously while taking advantage of attractive
opportunities along the yield curve, as well as Commercial Paper offers.
Please see indicative secondary market
NT-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
30-Apr-20 |
38 |
2.00 |
2.00 |
14-May-20 |
52 |
2.30 |
2.31 |
18-Jun-20 |
87 |
3.00 |
3.02 |
15-Aug-20 |
145 |
3.60 |
3.65 |
24-Sep-20 |
185 |
4.20 |
4.29 |
Rates are valid till 01:45pm today (23-Mar-2020)
*Please note that the subscription for T-Bills is N100, 000.00
United Capital PLC Commercial Paper
United Capital PLC ("United Capital" or the "Issuer") is seeking to
raise up to N15.0bn
in the first and second series of its N20.0bn Commercial Paper ("CP") Programme to finance
its short-term working capital requirements.
United Capital is a financial services group in Africa listed on the
Nigerian Stock Exchange with operations in Investment Banking, Asset
Management, Trusteeship, Securities Trading, Wealth Management and Consumer
finance. The Issuer's 2019 audited financial statement shows a revenue of ₦8.6bn,
a 58.0% Profit After Tax (PAT) margin and total assets of over N150.5bn.to
finance its working capital.
Please
see below the terms of the offer:
Issuer |
United Capital PLC |
||
Size |
Up to N15 billion across both tenors |
||
Series |
1 |
2 |
|
Tenor |
182-Day |
270-Day |
|
Effective
Yield (%) |
7.5000 |
8.0000 |
|
Discount
Rate (%) |
7.2303 |
7.5542 |
|
Issuer
Rating |
Bbb+ (Agusto & Co. Limited); A- (DataPro Limited); |
||
Subscription |
Minimum of ₦5.0 million and multiples of N1,000 thereafter |
||
Tax
Considerations |
Free and clear of withholding taxes |
||
Offer Open
Date |
Friday, 20 March 2020 |
||
Offer
Close/Allotment Date |
Tuesday, 24 March 2020 |
||
Settlement
Date |
Wednesday, 25 March 2020 |
Offer valid till 9:00am on (24-Mar-20)
*Please note that the minimum subscription for Commercial Papers is N5,000,000.00
FGN Bonds Update: Bearish Sentiments
Persist as Investors React to COVID-19 Outbreak and Dwindling Oil Price, Bond
Auction holds this Week
In
the bonds market last week, bearish sentiments persisted albeit less aggressive
than the previous week as inflows from bonds coupon payment (c.N170.0bn)
spurred demand from local investors seeking to cherry pick bonds with
attractive yields. However, foreign investors continued to exit their positions
in reaction to the spread of COVID-19 and further decline in oil prices to a
17-year low of $24.0 per barrel. As a result, average yield across the curve
rose further by 19bps W-o-W to settle at 11.8%. Most sell-offs witnessed were
concentrated on the 23-Jul-30 (+196bps), 27-Apr-23 (+136bps) and 18-Mar-36
(+94bps) maturities.
Also,
during the week, the CBN announced six policy measures and offered a total of N1.1trillion
stimulus package in a bid to weather the uncertainties and risks that the
COVID-19 pandemic might pose to the economy. Furthermore, the Federal
government through the ministry of Budget and National planning announced plans
to cut its 2020 budget by N1.5
trillion to N9.09 trillion in consideration of the dwindling oil prices.
Going
into this week, the Debt Management Office (DMO) is expected to offer N50.0bn
at the FGN Bond auction - comprising of the 12.75% FGN APR-2023 (Re-opening),
FGN MAR-2035 (New-issue), and FGN MAR- 2050 (New-issue) -to investors.
Please
see details of this week's auction below:
BOND |
12.75% FGN APR 2023 (5- Yr Re-opening) |
FGN MAR-2035 (New-issue) |
FGN MAR- 2050 (New-issue) |
Term-To-Maturity |
3 Years 1months |
15 Years |
30 Years |
Amount on Offer |
N10.0 - N20.0bn |
N10.0 - N20.0bn |
N15.0 - N25.0bn |
We expect the bearish momentum to be sustained at the start of the week
as investors wait on the side-lines ahead of the MPC meeting. Nevertheless, we expect market activities to remain muted as investors trade
cautiously ahead of the bond auction. Thus, we advise investors to trade cautiously while bargain hunting for
bonds with attractive yields.
Please see indicative secondary market bond rates
below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Jul-21 |
2 |
6.20 |
14.50 |
110.29 |
Jan-22 |
3 |
6.40 |
16.39 |
117.11 |
Apr-23 |
4 |
9.70 |
12.75 |
107.97 |
Mar-24 |
5 |
9.70 |
14.20 |
114.55 |
Mar-25 |
6 |
10.60 |
13.53 |
111.15 |
Jan-26 |
7 |
11.55 |
12.50 |
103.91 |
Mar-27 |
8 |
11.85 |
16.29 |
120.68 |
Feb-28 |
9 |
11.85 |
13.98 |
110.73 |
Jul-34 |
15 |
11.80 |
12.15 |
102.35 |
Mar-36 |
17 |
11.70 |
12.40 |
105.01 |
Apr-37 |
18 |
12.00 |
16.25 |
130.54 |
Apr-49 |
30 |
11.90 |
14.80 |
123.49 |
Rates are valid till 01:45pm today (23-Mar-2020)
*Please note that the minimum subscription for Bonds is N20,
000,000.00
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