PMA Holds on Wednesday; Average Yield at the NT-Bills Secondary Market Expands 28bps WoW to 4.63%

Proshare

Monday, April 26, 2021 / 02:51 PM / by Afrinvest Research / Header Image Credit: Science Focus


Proshare Nigeria Pvt. Ltd.


Last week, activities in the Nigerian Treasury Bills ("NT-Bills") secondary market started off on a quiet note with low volumes of trades across the curve as rates remained largely unchanged. However, by Wednesday the overall sentiment in the market turned bearish due to tightened liquidity which further deepened to N123.5bn on Wednesday. Consequently, the average yield across all tenors advanced 28bps W-o-W to settle at 4.63% from 4.35% the previous week.

 

Particularly, the shorter-end of the curve experienced the most sell-offs, increasing 38bps W-o-W, especially the 10-Jun-21, 01-Jul-21, and 15-Jul-21 maturities which strengthened by 55bps, 51bps, and 48bps respectively. Similarly, medium- and long-term NT-Bills inched 14bps and 35bps higher W-o-W respectively.


At the Open Market Operations ("OMO") auction last week, results revealed a slight drop in stop rates of the short end (96-Day) and middle-end (187-Day) of the curve - now 6.90% from 7.00% and 8.48% from 8.50% respectively while the longest bill (355-Day) maintained its previous rate at 10.10%. This is the first change in OMO stop rates since February 2021. The Central Bank of Nigeria ("CBN") sold a low volume of N12.84bn across the 96, 187, and 355-Day tenors on the total offer of N20.0bn, recording a total bid-to-cover ratio of 1.65x (N21.3bn subscribed).

Going into the week, a total of N88.5bn worth of NT-Bills investment is expected to mature and be rolled over by the Apex Bank in the Primary Market Auction (“PMA”) on Wednesday across the 91, 182, and 364-Days tenors.


Please see our expectation of the auction in the table below:


Auction Date

28-Apr-21

28-Apr-21

28-Apr-21

Allotment Date

29-Apr-21

29-Apr-21

29-Apr-21

Tenor

(91-Days)

(182-Days)

(364-Days)

Value on Offer (N)

11,388,756.0

6,000,000.0

71,074,821.0

Previous Stop Rates (%):

2.00

3.50

9.00

Expected Stop Rate Range (%):

1.80 - 2.20

2.90 - 3.50

8.50 - 10.00

 


Furthermore, we expect bolstered liquidity levels this week given expected inflows from maturing NT-Bills (N88.5bn), OMO (N20.0bn), FGN bond coupon payments (N160.3bn), and possibly federal government allocations scheduled to hit the system.  We advise investors to look out for more attractive offerings from corporates while qualified investors may position in the NT-Bills PMA as well as short-term bonds that advanced last week.


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

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

29-Jul-21

94

2.00

2.01

16-Sep-21

143

3.20

3.24

11-Nov-21

199

4.60

4.72

13-Jan-22

262

5.00

5.19

31-Mar-22

339

6.56

6.99

Rates are valid till 01:45 pm today (26-Apr-21)

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



Proshare Nigeria Pvt. Ltd.


FGN Bonds Update: Bearish Run Persists as Average Yield Advances 127bps W-o-W to 11.64%


Last week, the FGN bond secondary market resumed on a quiet note, as market players shifted focus to the bond PMA conducted last Wednesday. Accordingly, the average yield across all maturities advanced 127bps W-o-W to settle at 11.64% from 10.37% in the previous week.

Specifically, short-term bonds such as 27-Apr-2023, 14-Mar-2024, and 23-Mar-2025 experienced the most sell-offs advancing 330bps, 270bps and 201bps W-o-W respectively.

Accordingly, the average yield across all maturities advanced 127bps W-o-W to settle at 11.64% from 10.37% in the previous week. Specifically, short-term bonds such as 27-Apr-2023, 14-Mar-2024, and 23-Mar-2025 experienced the most sell-offs advancing 330bps, 270bps and 201bps W-o-W respectively.

At the PMA, the Debt Management Office ("DMO") offer of N150.0bn was met with a strong overall subscription of 1.8x. Interestingly, the DMO sold less than it offered in the 2027s and 2035s while the 2045 instrument was oversold by almost 2.0x, bringing the total amount allotted to about N158.0bn. The stop rates improved to 12.25% (+175bps), 13.34% (+184bps) and 13.85% (+185bps) respectively.

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

 

Proshare Nigeria Pvt. Ltd.

 


Going into the week, we expect increased buying interest in the secondary market on the back of expected improved liquidity levels as coupon payments worth N160.3bn on Apr-2023, Apr-2029, and Apr-2049 bonds are disbursed. We however believe investors may stay on the sidelines in the first trading sessions of the week due to the NT-Bills PMA slated for Wednesday.

Thus, we advise investors to take advantage of opportunities in bonds that advanced last week while short-term players may position in the 364-Day instrument at the NT-Bills PMA.



Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

8.45

12.75

107.78

Mar-24

3

8.30

14.20

114.83

Mar-25

4

8.40

13.53

116.77

Jan-26

5

10.90

12.50

105.76

Mar-27

6

11.40

16.29

120.53

Feb-28

7

11.45

13.98

111.72

Jul-34

13

12.35

12.15

98.66

Mar-36

15

12.30

12.40

100.64

Apr-37

16

12.45

16.25

126.08

Apr-49

28

13.05

14.80

113.02

Rates are valid till 01:45 pm today (26-April-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


Related News

  1. NSE Lists FGN US$500,000,000 6.375% Notes due 2023 Eurobond
  2. NSE Lists Fidelity Bank Plc's N41.21bn 10 Years Series 1 Bonds
  3. NSE Lists FBNQuest Merchant Bank SPV Funding Plc N8bn 6.25% Series II Bond
  4. DANGCEM Series 1 Fixed Rate Senior Unsecured Bonds, Under the NGN 300bn Programme Now Open
  5. April 2021 Bond Auction: Another Decent Bond Auction for the DMO
  6. Local Banks Shrug Off OMO Auction Supply As CBN Maintains Tight Grip On System Liquidity
  7. Summary of FGN Bond Auction Results for April 2021
  8. DMO Raises Rates At Monthly Auction Once Again, As Senate Approves $2.7Bn External Borrowing Plan
  9. Ahead of Next FGN Bond Auction Scheduled for 21st April 2021
  10. Market Prices in Expectations Ahead of The FGN Bond Auction Scheduled for This Week
  11. FGN Bond Auction Holds this Wednesday; Average Yield in NT-Bills Secondary Market Dips to 4.35%
  12. NSE Lists BUA Cement Plc Series 1 Bonds

 

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP