Bullish Trend Persists as Average Yield Dipped 8bps WoW to 4.69%

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Monday, August 23, 2021 / 02:17 PM / By Afrinvest Research / Header Image Credit: iStock

 

Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market sustained a bullish run amidst pressured liquidity levels (which fell to N72.3bn short on Friday), due to persistent demand on the long-dated maturities (as average yields contracted 56bps W-o-W). Consequently, average yield dipped by 8bps W-o-W to close at 4.69% from 4.77% in the previous week.


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This week, a total of N157.2bn worth of maturing NT-Bills will be rolled over by the Apex Bank in the Primary Market Auction ("PMA") on Wednesday, 25-Aug-21, across the 91-, 182- and 364-Day tenors.

 

Please see our expectations below:

Auction Date

25-Aug-21

25-Aug-21

25-Aug-21

Allotment Date

26-Aug-21

26-Aug-21

26-Aug-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Value on Offer (N)

3,123,978.0

32,705,313.0

121,376,867.0

Previous Stop Rates (%)

2.50

3.50

8.67

Expected Stop Rate Range (%)

1.80 - 2.20

2.90 - 3.50

8.00 - 8.75

 

We anticipate improved activity levels in the NT-Bills secondary market this week, given the expected buoyant liquidity levels from maturing instruments (NT-Bills: N157.2bn, OMO bills: N177.3bn) in the financial system. Thus, we advise investors to continue to position in relatively attractive bills across the curve while also looking out for possible corporate offerings.

 

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

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

28-Oct-21

66

2.95

2.97

25-Nov-21

94

4.20

4.25

10-Feb-22

171

4.93

5.05

12-May-22

262

6.10

6.38

09-Jun-22

290

6.64

7.01

14-Jul-22

325

7.26

7.76

Rates are valid till 01:45 pm today (23-Aug-21)

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


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FGN Bonds Update: Bullish Run Sustained as Average Yield Sheds 16bps W-o-W to 11.38%

The FGN bonds secondary market sustained its bullish trend last week, as funds were channelled from unmet bids at the PMA. As a result, average yield across all maturities dipped 16bps W-o-W to settle at 11.38% (from 11.56% the previous week), with the most buying interests recorded on the 17-Mar-27 (-76bps W-o-W) and 14-Mar-24 (-39bps W-o-W) maturities.

 

At the PMA, the Debt Management Office's ("DMO") total offer of N150.0bn was met with a strong demand, recording an overall subscription of 2.1x. In addition, the highest subscription at the auction was recorded on the 2050s which had N177.4bn subscription. Furthermore, the DMO reduced the stop rate offered across all offers to 11.60%, 12.75%, and 12.80% (from 12.35%, 13.15% and 13.25% respectively) while the total bid-to-cover ratio stood at 1.35x.

 

Please see a detailed summary of the FGN bond PMA below:

 

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

Amount Offered (N)

50,000,000,000.0

50,000,000,000.0

50,000,000,000.0

Total Subscription (N)

77,689,108,000.0

104,947,000,000.0

177,382,900,000.0

Amount Allocated (N)

64,248,408,000.0

91,027,000,000.0

104,814,900,000.0

Bid to Cover Ratio

1.21x

1.15x

1.69x

Subscription Ratio

1.55

2.10

3.55

Stop Yield (%)

11.60%

12.75%

12.80%

Previous Auction Stop Yield (July 2021)

12.35%

13.15%

13.25%

Difference between Current and previous Stop Yields

75bps

40bps

45bps

 

Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

9.20

12.75

105.37

Mar-24

3

9.30

14.20

110.91

Mar-25

4

9.60

13.53

111.65

Jan-26

5

9.90

12.50

109.09

Mar-27

6

10.55

16.29

123.67

Feb-28

7

10.70

13.98

115.09

Jul-34

13

11.45

12.15

104.63

Mar-36

15

11.70

12.40

104.82

Apr-37

16

11.65

16.25

132.73

Apr-49

28

11.60

14.80

126.32

Rates are valid till 01:45 pm today (23-Aug-21) 

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

 

Going into the week, we expect reduced buying interest in the FGN bonds secondary market, in line with the Federal Government’s plans to commence the issuance of planned $6.2bn Eurobond in September 2021. Therefore, we advise investors to cherry-pick bonds with relatively attractive yields across the curve. NN


Proshare Nigeria Pvt. Ltd.


Related News

  1. More Work for the DMO to Meet Funding Target
  2. Summary of FGN Bond Auction Results for August 2021
  3. DMO Oversells N260bn While Cutting Rates Off the Back of Strong Demand at the FGN Bond Auction
  4. NGX Lists Two Additional FGN Savings Bonds Issued in August 2021
  5. Bond Yields Crash Following Continued Slow Down In Inflation Rates
  6. Ahead of Next FGN Bond Auction Scheduled for August 18th, 2021
  7. Silent Open To The Week As The Monthly Bond Auction Draws Near
  8. Bond Yields in Nigeria to Trade between 12% and 13% for Remainder of 2021
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