Average NT-Bills Yield Rises to 4.0% Amidst Mixed Investors' Sentiments; UCAP Plc CP Available

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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 (N)

2,000,000,000

8,385,196,000

37,176,061,000

Total Subscription (N)

8,947,177,000

27,356,003,000

92,367,822,000

Allotment (N)

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

 

Proshare Nigeria Pvt. Ltd.


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