Mild Bullish Outing on First Trading Week of the Year as Average Yield Dips 4bps WoW to 0.4%

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Monday, January 11, 2021 / 2:58 PM / By Afrinvest Research / Header Image Credit: Fox Business


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Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market kicked off the year on a slightly quiet note as activities remained minimal for most trading sessions of the week. However, on Wednesday, renewed buying activities was recorded as average yield across all tenors contracted 7bps on the day to 0.40% from 0.47% the previous day.

 

As a result, average yield across all maturities fell marginally by 4bps W-o-W to settle at 0.43% from 0.47% the previous week. In more detail, the shorter-end of the curve witnessed the most buying interests, declining 16bps W-o-W, especially on the 28-Jan-21, 11-Feb-21 and 25-Feb-21 maturities which dipped 20bps, 18bps and 16bps W-o-W respectively. Similarly, the medium-term bills dipped marginally by 2bps W-o-W while the long-dated maturities remained flat.

 

At the first Open Market Operations ("OMO") auction for the year, the Central Bank's total offer of N60.0bn across the 96-, 180- and 362-Day tenors was met with significant demand, recording a total bid-to-cover ratio of 11.3x (N678.6bn subscribed). The long-dated offer enjoyed majority of investors demand, recording a bid-to-cover of 13.5x (N539.8bn subscribed vs N40.0bn offered). Additionally, the apex bank widened stop rates on the medium and long-term offers to 4.3% and 5.7% respectively, while the stop rate on the short-term offer was tightened to 1.5%.

 

Furthermore, we expect to see improved activities in the NT-Bills secondary market given the elevated liquidity levels (N982.0bn positive as at Friday) and the expected inflows from maturing OMO bills (N211.3bn) and NT-Bills (N231.8bn) scheduled to hit the system on Thursday as investors await the release of the PMA Q1:2021 calendar.

 

Thus, we advise investors to look out for possibly more attractive offers in the bond space or higher yielding offers from corporates.

 

Please see T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

29-Apr-21

108

1.20

1.20

13-May-21

122

1.45

1.46

15-Jul-21

185

1.90

1.92

16-Sep-21

248

2.20

2.23

25-Nov-21

318

2.66

2.72


Rates are valid till 01:45pm today (11-Jan-21)


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

 

FGN Bonds Update: Bearish Streak Sustained as Average Yield Expands 32bps W-o-W to Settle at 6.4%


The FGN Bond secondary market sustained its bearish momentum last week, as low volume trades by local players were recorded. Consequently, average yield across all maturities advanced 32bps W-o-W to settle at 6.4% from 6.1% the previous week. Particularly, the 27-Mar-35, 23-Feb-28 and 18-Apr-37 maturities witnessed the most sell-offs, expanding 94bps, 85bps and 79bps W-o-W respectively.

 

Going into the week, we expect that the FGN Bond secondary market will maintain its current activity levels as investors trade more cautiously in anticipation of the release of the first FGN Bond primary market auction calendar for the year. We therefore advise investors to take position in maturities that have advanced along the yield curve while looking out for attractive corporate offerings.

 

Please see below FGN Bonds secondary market rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

1.10

16.39

115.76

Apr-23

3

2.20

12.75

123.44

Mar-24

4

3.15

14.20

133.12

Mar-25

5

3.80

13.53

137.42

Jan-26

6

5.30

12.50

131.40

Mar-27

7

5.50

16.29

155.87

Feb-28

8

5.80

13.98

147.11

Jul-34

14

7.20

12.15

142.31

Mar-36

16

7.20

12.40

147.53

Apr-37

17

7.20

16.25

185.88

Apr-49

29

7.25

14.80

190.22


Rates are valid till 01:45pm today (11-Jan-21)


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

 

Proshare Nigeria Pvt. Ltd.


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