Mild Bullish Performance as Average Yield Dips 7bps to 1.5%; PMA to Hold on Wednesday

Proshare

Monday, August 24, 2020 / 02:18 PM / By Afrinvest Research / Header Image Credit: Business AM Live

 

Last week, the Nigerian Treasury Bills ("T-Bills") secondary market traded on mixed sentiments, as market players traded calmly due to the pressured liquidity levels (N88.0bn in the positive) at the start of the week. Although this was sustained as the week progressed, pocket-sized demand driven activity was however witnessed on the longer-end of the curve as its average yield fell 70bps W-o-W to 2.1% from 2.8% the previous week.

 

Consequently, average yield across all tenors declined 7bps W-o-W to settle at 1.5% from 1.6% the previous week. Particularly, the most demand was witnessed at the long-dated maturities including the 29-Apr-21 and 13-May-21 bills that contracted 77bps and 71bps W-o-W respectively.


Going into the week, the CBN is expected to rollover N197.6bn worth of maturing NT-Bills across the 91-, 182- and 364-day tenors at the Primary Market Auction on Wednesday.

 

Please see below our PMA expectations:

Tenor

91- Day

182 – Day

364 - Day 

Offer Amount (N)

20,372,790.00

31,751,846.00

145,475,021.00

Previous Stop Rate

1.2000%

1.3890%

3.1999%

Expected Stop Rate Range

1.2000% - 1.3000%

1.3500% - 1.4000%

3.000% - 3.2000%

 

In addition, we expect the yields in the secondary market to remain subdued due to improved system liquidity (N420.1bn long as at Friday) along with NT-Bills maturity worth N197.6bn scheduled to hit the system on Thursday. We therefore maintain that investors take advantage of the more attractive instruments along the yield curve along with possible commercial paper offerings.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

8-Oct-20

45

2.75

2.76

26-Nov-20

94

3.65

3.68

28-Jan-21

157

4.13

4.20

13-May-21

262

4.45

4.60

10-Jun-21

290

4.64

4.82

Rates are valid till 01:45pm today (24-Aug-2020)

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

 

FGN Bonds Update: Sustained Bearish Performance as Average Yield Improves 13bps to 8.0%

The domestic bonds secondary market sustained its bearish performance last week, as investors anticipated the Bond Primary Market auction slated for Wednesday. As a result, average yields across all tenors advanced 13bps to 8.0% from 7.9% the previous week with the most sell-offs witnessed on the 18-APR-37 (+37bps), 26-APR-29 (+34bps) and 22-MAY-29 (+32bps) maturities.


On Wednesday, the Debt Management Office ("DMO") rolled over a total of N150.0bn across the 10-year, 15-year, 25-year and 30-year re-opening instruments. The offer witnessed significant demand as its offer recorded a total bid-to-cover ratio of 1.6x (N150.0bn offered vs. N242.2bn subscribed).


Please see below the details of the auction:

 

12.50% JAN 2026

12.50% MAR 2035

9.80% JUL 2045

12.50% MAR 2050

Auction Date:

25-Mar-20

25-Mar-20

25-Mar-20

26-Mar-20

Tenors:

10-Yr Re-opening

15-Yr Re-opening

25-Yr Re-opening

30-Yr Re-opening

Term-To-Maturity:

5 Years, 5 months

14 Years,7 months

25 Years,11 months

29 Years,7 months

Amount Offered:

N25.00 billion

N40.00 billion

N45.00 billion

N40.00 billion

Subscription:

N32.68 billion

N48.82 billion

N46.44 billion

N114.29 billion

Amount Allotted:

N25.42 billion

N21.45 billion

N16.09 billion

N53.69 billion

Range of Bids:

5.23% - 12.50%

8.00% - 12.00%

6.00% - 13.25%

8.50% - 12.15%

Stop Rates:

6.7000%

9.3500%

9.7500%

9.9000%

Previous Stop Rates:

8.7500%

10.7000%

12.1500%

12.1500%

Bid to Cover Ratio:

1.3x

1.2x

1.0x

2.9x

Allotment Ratio:

0.8x

0.4x

0.3x

0.5x

   

This week, we expect a bullish performance in the bonds secondary market as investors seek to fill their lost bids from the PMA and advise investors to take position on the relatively more attractive maturities along the curve while looking out for possible corporate offerings.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jan-22

2

3.25

16.39

118.12

Apr-23

3

4.30

12.75

121.12

Mar-24

4

4.20

14.20

132.69

Mar-25

5

4.40

13.53

137.48

Jan-26

6

5.85

12.50

130.45

Mar-27

7

7.00

16.29

148.19

Feb-28

8

7.05

13.98

139.83

Jul-34

14

7.55

12.15

139.15

Mar-36

16

8.95

12.40

128.67

Apr-37

17

9.10

16.25

160.68

Apr-49

29

9.20

14.80

156.22

Rates are valid till 01:45pm today (24-Aug-2020)

*Please note that the minimum subscription for T-Bills is N20,000,000.00

 

Proshare Nigeria Pvt. Ltd.


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