Secondary Market Maintains Bullish Run as Average Yield Declines 14bps WoW to 5.19%

Proshare

Monday, November 15, 2021 / 12:17 PM /  By Afrinvest Research / Header Image Credit: iStock

 

Last week, the Nigerian Treasury Bills ("NT-Bills") market maintained its bullish run, with yields contracting -14bp W-o-W from 5.33% to 5.19%, as investors' unmet bids trickled in from the primary market auction, with all tenors experiencing buying interest.

 

In more detail, average yields on the short, medium, and long term declined -6bps, -1bps, and -26bps W-o-W respectively. Particularly, the longer-end of the curve experienced the most contraction in yields especially the 13-Oct-22 (-31bps), 08-Sep-22 (-22bps), and 09-Jun-22 (-22bps) bills.


Proshare Nigeria Pvt. Ltd.


At last Wednesday's Primary Market Auction ("PMA"), the central bank's total offer of N150.8bn was met with strong demand, recording a subscription ratio of 3.8x (total subscription: N574.8bn).
The 364-Day instrument maintained its strong demand levels with a bid-to-cover ratio of 4.1x (subscription: N566.2bn).


Furthermore, stop rates on the long-term offer declined 49bps to settle at 6.50% (from 6.99% at the previous auction) while rates on the short- and mid-term offers remained the same.
 

Auction Date

10-Nov-21

10-Nov-21

10-Nov-21

Allotment /Issue Date

11-Nov-21

11-Nov-21

11-Nov-21

Tenor

91-Day

182-Day

364-Day

Offer Amount(₦)

4,803,397,000.00

7,987,291,000.00

138,032,470,000.00

Subscription (₦)

4,871,905,000.00

3,804,516,000.00

566,205,916,000.00

Allotment (₦)

4,116,905,000.00

2,998,516,000.00

189,056,996,000.00

Range of Bid Rates (%):

2.49-5.5000

3.49-6.75

5.98-10.00

Previous Stop Rates (%)

2.5

3.5

6.99

Stop Rates (%)

2.5

3.5

6.5

Subscription Ratio

1.0x

0.5x

4.1x

Allotment Ratio

0.8x

0.8x

0.3x


This week, we expect Open Market Operations ("OMO") maturities of N72.5bn to bolster system liquidity, which was at N460.9bn on Friday.


We anticipate high demand levels in the secondary market as investors channel their unfilled PMA bids into the secondary market along with buoyant liquidity levels.


We therefore advise investors to tread cautiously and take position in relatively attractive offers along the curve while market players with a longer horizon can take advantage of the yields in the bonds space. 
  

Proshare Nigeria Pvt. Ltd. 


Please see indicative secondary market NT-Bills rates below:

Maturity

        Tenor (Days)

          Rate (%) p.a.

      Yield (%) p.a.

13-Jan-22

               59

                  1.90

             1.91

31-Mar-22

              136

                  4.15

             4.22

26-May-22

              192

                  5.00

             5.14

30-Jun-22

              227

                  5.65

             5.86

25-Aug-22

              283

                  6.74

             7.11

9-Sep-22

              298

                  7.04

             7.47

 Rates are valid till 01:45 pm today [15-Nov-21]
*Please note that the minimum subscription for NT-Bills is N100,000.00

 

FGN Bonds Update: Flat Performance with Slightly Bullish Bias as Average Yield Declines 1bps W-o-W to 11.30%


The bonds secondary market had a slight bullish run last week as a result of the relatively buoyant system liquidity which stood at N403.9bn on Wednesday, as FGN bonds market players continue to cherry-pick attractive offers across the curve. The average yield across all tenors declined by 1bps W-o-W to settle at 11.30% from 11.31% the previous week, with the short-term maturities experiencing the most decline in yields. Particularly, 23-Mar-25 and 27-Apr-23 maturities witnessed the most buying interest, declining 96bps, and 46bps W-o-W respectively.

This week, the Debt Management Office ("DMO") is slated to conduct a PMA on Wednesday, offering a total of N150.0bn across three re-opening bonds.

Please see more details in the table below:

BONDS

12.50% FGN JAN 2026

16.2499% FGN APR 2037

12.98% FGN MAR 2050

 

10-Yr Re-opening

20-Yr Re-opening

29-Yr Re-opening

Term to Maturity

5Years

16Years

24 Years

Offer Amount (bn N)

50,000,000,000

50,000,000,000

50,000,000,000

Previous Stop Rates (%)

11.65

12.95

13.2


We expect the week to resume on a quiet note at the secondary market, as investors stay on the sidelines in anticipation of Wednesday's PMA and forestall more activities as market players attempt to fill unmet bids from the auction. Therefore, we advise that investors scout for attractive opportunities across the yield curve and be on the lookout for attractive corporate offerings.

Proshare Nigeria Pvt. Ltd. 


Please see below FGN bonds secondary market rates:

Bond

     Tenor (Years)

      Yield (%)

      Coupon (%)

       Implied Price (N)

Apr-23

               2

             7.50

             12.75

                   107.07

Mar-24

               3

             8.20

             14.20

                   112.46

Mar-25

               4

             9.35

             13.53

                   111.77

Jan-26

               5

           10.45

             12.50

                   106.77

Mar-27

               6

           10.90

             16.29

                   121.34

Feb-28

               7

           11.20

             13.98

                   112.24

Apr-29

               8

           10.60

             14.55

                   119.97

Jul-34

               9

           11.30

             12.15

                   104.18

Mar-36

              14

           11.85

             12.40

                   103.52

Apr-37

              16

           11.95

             16.25

                   129.12

Apr-49

              28

           11.80

             14.80

                   121.06

Mar-50

              29

           12.15

             12.98

                   106.55

 Rates are valid till 01:45 pm today [15-Nov-21]

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

Proshare Nigeria Pvt. Ltd.


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