Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday, April 06, 2020 /01:34
PM / By Afrinvest Research / Header Image Credit: India Info
The
bullish run in the Nigerian Treasury Bills ("NT-Bills")
secondary market continued last week owing to improved trading activities
across the mid and long end of the yield curve. The uptick in investors' sentiments
was largely supported by robust system liquidity that stemmed from a CRR refund
(c. N200.0bn) on Tuesday as well as inflows from maturing Open Market
Operation ("OMO") bills (N288.6bn) on Thursday. As a result,
average yield across all tenors pared to 3.2% from 3.7% the previous week with
major bids occurring at the 30-Jul-20 (-143bps), 27-Aug-20 (-128bps) and
10-Sep-20 (-115bps) maturities.
On
Wednesday, the CBN rolled over N95.7bn at the NT-Bills Primary Market
Auction ("PMA") compared to investors' oversubscription of N161.4bn
with the 91-day instrument enjoying the most interest at 2.1x bid to cover
ratio. Consequently, stop rates across the short medium and long tenor
instruments cleared lower to 2.2%, 3.2% and 4.3% respectively.
Please see a detailed summary of the PMA in the table below:
Auction Date |
1-Apr-20 |
1-Apr-20 |
1-Apr-20 |
Allotment / Issue Date |
2-Apr-20 |
2-Apr-20 |
2-Apr-20 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount ( |
10,000,000,000 |
17,600,581,000 |
68,080,464,000 |
Total Subscription ( |
20,707,145,000 |
28,819,635,000 |
111,858,781,000 |
Allotment ( |
10,000,000,000 |
17,600,581,000 |
68,080,464,000 |
Range of Bid Rates (%) |
2.0000 - 3.7500 |
3.0000 - 4.8500 |
3.5590 - 10.0000 |
Stop Rates (%) |
2.2000 |
3.2000 |
4.3000 |
Previous Stop Rates (%) |
2.3000 |
3.4000 |
4.6000 |
Bid-to-Cover Ratio |
2.1x |
1.6x |
1.6x |
Allotment Ratio |
0.5x |
0.6x |
0.6x |
In
addition, the Apex bank conducted an OMO auction on Thursday, offering a total
of N110.0bn across the 75-, 166- and 348-Day instruments. Similar to
previous OMO auctions, investors interest remained lackluster as the short and
medium term bills did not receive any subscription while the long term bill was
grossly undersubscribed by 0.2x. Nevertheless, the CBN allotted only N4.0bn
out of the N21.0bn subscription as stop rate cleared lower at 12.8%
(vs.12.99% at the previous auction).
Going
into the week, we expect inflows from maturing OMO bills worth N130.9bn to further bolster system liquidity (c.
N731.8bn long as of Friday). Barring any CRR
debit and substantial OMO sales by the Apex bank, we also expect the robust
system liquidity to boost demand further as investors seek to re-invest
maturing funds amidst limited money market investment options. Moreover, we
anticipate more blue-chip companies would issue commercial papers due to the
persistent low interest rate environment.
Please see indicative secondary market
NT-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
14-May-20 |
38 |
2.10 |
2.10 |
2-Jul-20 |
87 |
2.60 |
2.62 |
24-Sep-20 |
171 |
3.50 |
3.56 |
29-Oct-20 |
206 |
3.90 |
3.99 |
14-Jan-21 |
283 |
4.10 |
4.23 |
Rates are valid till 01:45pm today (6-Apr-2020)
*Please note that the minimum subscription for T-Bills
is N100,
000.00
Dangote Cement PLC Bond
Dangote Cement PLC ("Dangote Cement" or the "DCP") is
seeking to raise up to N100.0bn 5-year Fixed Rate Senior Unsecured Bonds,
under its N300.0bn debt issuance programme.
Dangote Cement, Nigeria's largest company by market capitalization on
the Nigerian Stock Exchange, is the largest cement manufacturer in Sub-Saharan
Africa with an installed capacity of 45.6Mta across its operations in 10
African countries. DCP operates a fully integrated "quarry-to-customer" business in 7 of its operations with activities covering manufacturing, sales
and distribution of cement. DCP plans to utilize proceeds of the bond issuance
to refinance existing short-term debt previously applied towards cement
expansion projects, working capital and general corporate purposes.
Please see below the terms of the
offer:
Issuer |
Dangote Cement PLC |
Issue
Size |
Up
to ₦100.0 billion |
Description |
Series 1 Fixed Rate Senior Unsecured Bonds |
Tenor |
5 years |
Effective Yield (%) |
12.2500 -12.5000 |
Par
Value /Issue Price |
|
Issuer Rating (Short term) |
AA+ (GCR); Aa2 (Moody) |
Issuer Rating (Long term) |
AA+ (GCR); Aa3 (Moody) |
Subscription |
Minimum of ₦10.0 million and multiples of ₦1,000
thereafter |
Coupon Basis |
Fixed Rate, Semi-annual |
Tax Considerations |
Free and clear of withholding taxes |
Offer Open Date |
Friday, 3 April 2020 |
Offer Close/Allotment Date |
Tuesday, 14 April 2020 |
Settlement Date |
Friday, 17 April 2020 |
Offer valid till 9:00am on (14-Apr-20)
*Please note that the minimum subscription for the Bond is N10,000,000.00
FGN Bonds Update: Average Yield Declines 25bps W-o-W as Bearish Momentum
Halts
Last week, the bonds market halted its bearish momentum as average yield
declined 25bps W-o-W to settle at 11.8%. Following
the release of the second quarter bond issuance calendar by the Debt Management
Office ("DMO"), demand from local investors improved across the yield
curve amidst tepid activities from foreign investors. Most buying interests
witnessed were concentrated on mid tenor bonds, particularly the 18-Jul-34
(-72bps), 27-Mar-35 (-56bps) and 18-Mar-36 (-34bps) maturities.
According
to the DMO, a total of N75.0bn to N165.0bn is expected to be
offered across the 5-year (12.75% APR-2023), 15-year, (12.50% MAR-2035) and
30-year (12.98% MAR 2050) reopening instruments during this quarter. This is
significantly lower when compared to the N560.0bn it raised in the first
quarter of 2020. Nevertheless, the DMO also noted that the amount to be offered
could change upon approval to raise the N850.0bn, approved as New
external borrowing, from the domestic market.
In
addition, the DMO suspended the April savings bond offer scheduled to open on
April 6th due to the lingering COVID-19.
This
week, we expect more activities in the bond market as improved system liquidity
continues to fuel local demand seeking to cherry pick bonds with attractive
yields in the secondary market. Investors
are thus advised to trade cautiously while bargain hunting for bonds with
attractive yields.
Please see indicative secondary market bond rates
below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price ( |
Jul-21 |
2 |
5.45 |
14.50 |
111.10 |
Jan-22 |
3 |
5.70 |
16.39 |
118.23 |
Apr-23 |
4 |
9.65 |
12.75 |
108.05 |
Mar-24 |
5 |
10.40 |
14.20 |
112.04 |
Mar-25 |
6 |
10.75 |
13.53 |
110.49 |
Mar-27 |
8 |
11.30 |
16.29 |
123.59 |
Feb-28 |
9 |
11.60 |
13.98 |
112.06 |
Jul-34 |
15 |
11.60 |
12.15 |
103.75 |
Mar-36 |
17 |
11.80 |
12.40 |
104.26 |
Apr-37 |
18 |
11.90 |
16.25 |
131.44 |
Apr-49 |
30 |
12.00 |
14.80 |
122.52 |
Rates are valid till 01:45pm today (6-Apr-2020)
*Please note that the minimum subscription for Bonds is N20,
000,000.00
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