Bonds & Fixed Income | |
Bonds & Fixed Income | |
706 VIEWS | |
![]() | |
PROSHARE | |
PROSHARE |
Monday, March 02, 2020 / 01:28 PM /
Afrinvest Research / Header Image Credit: Biz Watch Nigeria
Last
week, trading activities in the Nigerian Treasury Bills ("NT-Bills")
secondary market began on a quiet note, with pocket-sized demand skewed towards
the short-dated bills as investors anticipated the Primary Market Auction ("PMA")
slated for Wednesday. However, by the week's end, the interest enjoyed by
short-term bills shifted slightly to long-dated maturities - towards the newly
issued 1-year bill from the PMA. Despite this slight demand, yields trended
higher by 15bps W-o-W to settle at 4.0% from 3.9% the previous week following
the debut of these new bills to the secondary market. Particularly, the 15-Oct-20
and 29-Oct-20 maturities improved the most, advancing 28bps and
22bps W-o-W respectively.
At
the PMA on Wednesday, the Central Bank's total offer of N104.1bn across
the 91-, 182- and 364-day tenors recorded strong demand as anticipated,
oversubscribed by 2.5x with a total subscription of N261.5bn. The
long-term offer enjoyed the most buying interest, with a bid-to-cover ratio of
3.6x (N52.0bn offered vs. N175.0bn subscribed). Similarly, the
short- and mid-dated offers were met with significant demand, oversubscribed by
2.0x and 1.4x respectively. As expected, the Apex bank maintained stop rates
across the curve, save for the 364-day tenor which contracted by 84bps to 5.7%
from 6.5% at the previous auction.
Please
see below PMA results:
Auction Date |
26-Feb-20 |
26-Feb-20 |
26-Feb-20 |
Allotment / Issue
Date |
27-Feb-20 |
27-Feb-20 |
27-Feb-20 |
Tenor |
(91-Day) |
(182-Day) |
(364-Day) |
Offer Amount ( |
20,372,790,000 |
31,751,846,000 |
51,995,029,000 |
Total Subscription ( |
41,261,683,000 |
45,187,317,000 |
175,082,034,000 |
Allotment ( |
20,372,790,000 |
31,751,846,000 |
51,995,029,000 |
Range of Bid Rates (%): |
2.3500 - 4.0000 |
3.0000 - 6.0000 |
2.4000 - 13.1800 |
Stop Rates (%): |
3.00 |
4.00 |
5.70 |
Previous Stop Rates (%): |
3.00 |
4.00 |
6.54 |
Bid-to-Cover Ratio: |
2.0x |
1.4x |
3.4x |
Allotment Ratio |
0.5x |
0.7x |
0.3x |
The
CBN also conducted its customary Open Market Operations ("OMO") auction,
mopping up a total of N480.0bn despite the strong liquidity-driven
demand (N1.1tn worth of maturing bills flowing into the financial
system) as total subscription stood at N545.2bn. In addition, stop rates
further contracted across all offers to settle at 11.4% (-1bp), 11.6% (-3bps)
and 13.0% (-2bps) on the 89-, 180- and 362-day instruments respectively.
Please see
indicative secondary market NT-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
30-Apr-20 |
59 |
2.00 |
2.01 |
11-Jun-20 |
101 |
3.20 |
3.23 |
13-Aug-20 |
164 |
3.80 |
3.87 |
29-Oct-20 |
241 |
4.30 |
4.43 |
14-Jan-21 |
318 |
4.70 |
4.90 |
Rates are valid till 01:45pm today (02-Mar-20)
*Please
note that the minimum subscription for NT-Bills is N100,000.00
This
week, we expect to see a cautious start of the week in the OMO secondary market
as DMBs recover from the CBN's discretionary CRR debit of c. N700.0bn on Friday
while we expect strong activity from offshore players as they take advantage of
the more attractive yields in the OMO market. We also anticipate a bullish
performance in the NT-Bills secondary market, driven by buoyant system
liquidity (N133.6bn positive as at Friday) amidst the absence of primary
NT-Bills offers. Thus, we advise investors to take advantage of relatively
attractive opportunities along the yield curve, as well as expected Commercial
Paper ("CP") offers.
FGN Bonds Update: Bullish Performance Sustained as Average Yield
Declines 69bps W-o-W to 9.2%
Contrary
to the NT-Bills market, the bonds secondary market performance was bullish as
investors focused on the bonds space, resulting from excess matured funds as
well as lost bids from the previous week's PMA. However, by the last trading
session of the week, there was a halt in this earlier recorded bullish streak
as investors across all markets reacted to the Federal Ministry of Health's ("FMH")
confirmation of its first Coronavirus case.
Nonetheless,
yields plummeted 69bps on the week to close at 9.2% from 9.9% in the previous
week. Specifically, the MAR 2025s and 2024s felt the most
interest from investors, declining 1.7% and 1.3% W-o-W respectively.
Going
into the week, we expect a moderation of activity in the secondary market as
investors gauge the true impact of the FMH's discovery. Therefore, we advise
investors to source for opportunities in bonds that did not contract the
previous week, while retail bond investors can take advantage of the FGN
Savings Bond primary offer this week and relatively smaller volumes that may be
available in the secondary market.
Please see
indicative secondary market bond rates below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Jul-21 |
2 |
5.40 |
14.50 |
111.86 |
Jan-22 |
3 |
4.90 |
16.39 |
120.63 |
Apr-23 |
4 |
6.65 |
12.75 |
117.07 |
Mar-24 |
5 |
7.00 |
14.20 |
124.92 |
Mar-25 |
6 |
6.25 |
13.53 |
131.15 |
Jan-26 |
7 |
8.30 |
12.50 |
119.24 |
Mar-27 |
8 |
9.25 |
16.29 |
135.83 |
Feb-28 |
9 |
9.40 |
13.98 |
125.30 |
Jul-34 |
15 |
9.63 |
12.15 |
119.37 |
Mar-36 |
17 |
9.70 |
12.40 |
121.73 |
Apr-37 |
18 |
9.70 |
16.25 |
154.16 |
Apr-49 |
30 |
11.45 |
14.80 |
128.07 |
Rates are valid till 01:45pm today (02-Mar-20)
*Please
note that the minimum subscription for FGN Bonds is N20,000,000.00
Related News