Bullish Run Sustained as Average Yield Falls 95bps WoW

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Monday, August 16, 2021 / 1:51PM / by Afrinvest Research / Header Image Credit: Pexels

 

The Nigerian Treasury Bills ("NT-Bills") secondary market witnessed a sustained bullish run last week as funds that lost out of the Primary Market Auction ("PMA") were positioned in the secondary market. Also, system liquidity levels improved (N26.1bn as at Friday) as N51.5bn worth of matured NT-Bills hit the market on Thursday. Consequently, average yield across all maturities dipped 95bps to settle at 4.67% (from 5.62% the previous week).

 

In more details, buying interest was witnessed across all tenor as average yield across the short-, medium-, and long-end of the curve dipped 28bps, 133bps, and 128bps W-o-W respectively. Specifically, the 27-Jan-22 (-188bps), 10-Feb-22 (-180bps), and 24-Feb-22 (-172bps) saw the most decline in yield for the week in that order.

 

At the PMA last week, the Central Bank offered a total of N51.5bn across the 91-Day (N8.4bn), 182-Day (N16.0bn), and 364-Day (N27.0bn) which was met with mixed demand as the short- and mid-tenured bills were undersubscribed while the longest dated bill witnessed an oversubscription of 14.3x which put pressure on the stop rate to lose 85bps and close at 7.35% from 8.20% at the previous auction.


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Please see below the details of the PMA result:

Auction Date

11-Aug-21

11-Aug-21

11-Aug-21

Allotment Date

12-Aug-21

12-Aug-21

12-Aug-21

Maturity Date

11-Nov-21

10-Feb-22

11-Aug-22

Tenor

91-Day

182-Day

364-Day

Offer (N

8,435,074,000

16,056,994,000

27,000,000,000

Subscription (N)

6,149,397,000

5,103,689,000

387,122,440,000

Allotment (N)

4,803,397,000

3,745,689,000

147,778,713,000

Range of Bids (%)

2.4900 - 10.0000

3.4800 - 12.0000

6.8500 - 10.0000

Stop Rates (%)

2.50

3.50

7.35

Previous stop rate (%)

2.50

3.50

8.20

Bid-to-Cover Ratio

1.3x

1.4x

2.6x

Allotment Ratio

0.6x

0.2x

5.5x

Subscription Ratio

0.7x

0.3x

14.3x

 

Going into the week, we anticipate more activities in the NT-Bills secondary market as we expect N156.7bn worth of OMO maturities to hit the market and further strengthen the financial system liquidity (N26.0bn long as at Friday). Thus, we expect investors to take advantage of attractive instruments in the secondary market as yield dwindle further.


Please see the indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

28-Oct-21

73

3.45

3.47

25-Nov-21

101

4.20

4.25

13-Jan-22

150

4.65

4.74

10-Mar-22

206

5.40

5.57

12-May-22

269

6.30

6.61

9-Jun-22

297

7.24

7.69

Rates are valid till 01:45 pm today (16-Aug-21)

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

 

FGN Bond Update: Sustained Bullish Run as Average Yield Closed 11.56%

As predicted, the FGN Bonds secondary market sustained its bullish trend as buying interests in the market continue to force yields downwards. As a result, the average yield in the market shed 38bps to close 11.56% from 11.94% the previous week.

 

Specifically, average yield in the short-end of the curve fell the most, contracting 62bps W-o-W to settle at 9.30% from 9.92%. The average yield in the long-end of the curve also dipped 33bps W-o-W to close at 11.56% and the average yield at the mid-end of the curve shed 26bps to close at 12.06% for the same period.

 

The Debt Management Office ("DMO") is scheduled to conduct a PMA on Wednesday (18-Aug-21), where a total of N150.0bn will be offered across the FEB 2028, MAR 3036, and MAR 2050 instruments.


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Please see details of the bonds auction below:

Bonds

13.98% FGN FEB 2028

(Re-opening)

12.40% FGN MAR 2036

(Re-opening)

12.98% FGN MAR 2050

(Re-opening)

 

 

Term-To-Maturity

6 Years, 6 months

14 Years, 7 months

28 Years, 7 months

 

Offer Amount (N)

50,000,000,000

50,000,000,000

50,000,000,000

 

Previous Stop Rates

12.35%

13.15%

13.25%

 

 

This week, we expect quite sessions in the FGN Bonds secondary market as investors focus on the PMA. It is also expected that rates will adjust further at the PMA given the recent trend in the market. We however advice investors to position in attractive yields across all maturities.

 

Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

9.35

12.75

105.19

Mar-24

3

9.80

14.20

109.78

Mar-25

4

10.30

13.53

109.49

Jan-26

5

10.30

12.50

107.65

Mar-27

6

11.00

16.29

121.61

Feb-28

7

11.00

13.98

113.61

Jul-34

13

11.80

12.15

102.26

Mar-36

15

11.85

12.40

103.75

Apr-37

16

11.75

16.25

131.85

Apr-49

28

11.75

14.80

124.81

Rates are valid till 01:45 pm today (16-Aug-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


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