Average Yield Declines 24bps W-o-W to 1.7% on Strong Demand from Investors at PMA

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Monday, September 14, 2020 / 12:39 PM / By Afrinvest Research / Header Image Credit: Moneweb

 

Proshare Nigeria Pvt. Ltd.


Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market resumed on a bearish note despite buoyant system liquidity (N737.7bn positive as at Monday). As a result, average yields across tenors advanced 6bps on the day to 2.0% (from 1.9% the previous trading session) as mild sell-offs were witnessed on the short-term instruments due to investors' anticipation of the Primary Market Auction ("PMA") slated for Wednesday.

 

By the end of the week, demand improved as investors sought to place their lost bids from the PMA. As a result, average yields were subdued across tenors, contracting 24bps W-o-W to settle at 1.7% from 1.9% the previous week. Particularly, the mid- to long-term instruments witnessed the most demand, with the 31-Dec-20 (-60bps), 29-Jul-21 (-50bps) and 26-Aug-21 (-53bs) bills recording the most buying interest.

On Wednesday at the PMA, the Central Bank offered a total of N128.1bn across the 91-day, 182-day and 364-day tenors. The offer which was c. N20.0bn lower than the maturing value of N148.1bn, was met with improved demand from the previous auction, recording a total bid-to-cover ratio of 2.0x (from 1.1x at the last auction). Additionally, the CBN allotted its total offer amount of N128.1bn while tightening the stop rates across on its short, medium and long-term offers to 1.10%, 1.55% and 3.05% respectively.

 

Please see a detailed summary of the PMA results below:

Auction Date

09-Sep-20

09-Sep-20

09-Sep-20

Allotment / Issue Date

10-Sep-20

10-Sep-20

10-Sep-20

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer (N)

4,405,140,000

14,002,523,000

109,651,700,000

Subscription (N)

8,620,148,000

22,922,352,000

230,864,406,000

Allotment (N)

4,405,140,000

14,002,523,000

109,651,700,000

Range of Bid Rates (%):

1.0000 - 1.4666

1.2400 - 2.0100

2.7400 - 12.8000

Stop Rates (%):

1.10

1.55

3.05

Previous Stop Rates (%):

1.15

1.80

3.34

Bid-to-Cover Ratio:

2.0x

1.6x

2.1x

Allotment Ratio

0.5x

0.6x

0.4x

 

 

At the Open Market Operation ("OMO") auction on Thursday, investors showed strong demand for the Apex Bank's total offer of N70.0bn across the 75-, 180- and 355-day tenors. The CBN allotted its total offer across all tenors despite the significant demand from investors with a bid-to-cover ratio of 3.1x (N216.8bn subscribed). Also, the CBN maintained stop rates at previous levels on the short- and mid-term offers, while the long-term instrument contracted 4bps to 8.9%.

 

Please see T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

29-Oct-20

45

2.60

2.61

14-Jan-21

122

3.70

3.75

28-Apr-21

226

4.30

4.42

13-May-21

241

4.35

4.48

15-Jul-21

304

4.76

4.96

Rates are valid till 01:45pm today (14-Sep-20)

*Please note that the minimum subscription for T-Bills is N100,000.00

 

Proshare Nigeria Pvt. Ltd.


Going into the week, we expect this bullish sentiment to persist as market players with unmet bids from the PMA may filter into the T-Bills secondary market. Furthermore, we expect system liquidity (N587.3bn long as at Friday) to remain elevated this week due to maturing T-Bills (N178.8bn) and expected coupon payments worth N282.2bn. We therefore expect yields to remain depressed and advice investors to take advantage of relatively more attractive bills along the curve while also looking out for offers from corporates.

 

FGN Bonds Update: Bearish Streak Comes to a Halt as Average Yield Dips 39bps W-o-W to 7.7%

The bearish run in the FGN Bonds secondary market came to a halt last week, as investors demand improved significantly on the back of buoyant liquidity in the system. As a result, average yield across all tenors dipped by 39bps W-o-W to settle at 7.7% from 8.1% the previous week. Particularly, the 14-Mar-24 and 23-Mar-25 witnessed the most buying interest, contracting 185bps and 75bps W-o-W respectively.


Please see below FGN Bonds secondary market rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

2.75

16.39

118.15

Apr-23

3

3.10

12.75

124.06

Mar-24

4

3.30

14.20

135.75

Mar-25

5

4.20

13.53

138.05

Jan-26

6

5.70

12.50

130.97

Mar-27

7

6.75

16.29

149.55

Feb-28

8

7.05

13.98

139.58

Jul-34

14

8.85

12.15

126.01

Mar-36

16

8.90

12.40

129.13

Apr-37

17

9.05

16.25

161.21

Apr-49

29

9.20

14.80

156.20

Rates are valid till 01:45pm today (14-Sep-20)

*Please note that the minimum subscription for FGN Bonds is N20,000,000.00

 

This week, we anticipate demand driven activity in the Bonds secondary market as investors may seek opportunities in the FGN Bonds secondary market as a result of the buoyant liquidity levels. Thus, we advise investors to take advantage of the relatively more attractive mid-dated bonds that advanced last week.

 

Proshare Nigeria Pvt. Ltd.


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