Strong Demand Persists at PMA; Average Yield Declines 15bps WoW

Proshare

Monday, June 29, 2020 / 1:57 PM / By Afrinvest Research / Header Image Credit: THISDAYLIVE


Proshare Nigeria Pvt. Ltd.


The Nigerian Treasury Bills ("NT-Bills") secondary market started the week on a quiet note as investors anticipated the Primary Market Auction ("PMA") auction on Wednesday amidst low liquidity levels (N70.1bn on Monday).  However, by Thursday, system liquidity improved to N402.2bn, buoyed by inflows from matured NT-Bills and Open Market Operations ("OMO") instruments worth N88.9bn and N157.2bn respectively which boosted buying interest.

As a result, average yield across all tenors dipped 15bps W-o-W to close at 2.1% on Friday. Investors particularly demanded for the medium and long-term bills, with yields on the 11-Feb-21, 28-Jan-21 and 14-Jan-21 maturities declining by 64bps, 63bps and 60bps W-o-W respectively.

 

At the PMA, the apex bank offered a total of ₦88.9bn with a total subscription of N330.7bn. All tenors were oversubscribed with the most demand recorded on the 364-day tenor which had a 4.2x bid-to-cover ratio. Consequently, stop rates across the 91-, 182- and 364-day instruments closed lower at 1.8%, 1.9% and 3.4% respectively.

 

To mop up excess liquidity in the system, the CBN offered and sold N100.0bn worth of OMO bills on Thursday across the short, medium- and long-term maturities with a combined bid-to-cover ratio of 1.8x (N177.4bn total subscription vs. N100.0bn total offer). Stop rates across all tenors remained unchanged.

 

Please see detailed PMA results below:

Auction Date

 

01-Jul-2020

01-Jul-2020

01-Jul-2020

Allotment / Issue Date

 

02-Jul-2020

02-Jul-2020

02-Jul-2020

Tenor

 

(91-Day)

(182-Day)

(364-Day)

Offer Amount (N)

 

10,000,000,000

 

20,000,000,000

 

58,857,012,000

 

Total Subscription (N)

 

24,984,446,000

58,821,335,000

246,882,729,000

Allotment (N)

 

10,000,000,000

20,000,000,000

58,857,012,000

Range of Bid Rates (%):

 

1.4980 - 2.9500

1.7000 - 4.2100

2.8500 - 12.8000

Stop Rates (%):

 

1.7890

1.9100

3.3900

  Previous Stop Rates (%):

 

1.8000

2.0400

3.7460

  Bid-to-Cover Ratio:

 

2.5x

2.9x

4.2x

  Allotment Ratio:

 

0.4x

0.3x

0.2x

 

This week, we anticipate maturing OMO bills worth ₦16.0bn to hit the system and bolster liquidity. We also expect sustained buying interests in the secondary market, due to the unfilled bids from last week’s PMA.

Investors are advised to take advantage of the relatively attractive bills along the curve while also remaining alert for commercial paper offerings that might be announced.

 

Proshare Nigeria Pvt. Ltd.


Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

13-Aug-20

38

2.55

2.56

10-Sep-20

66

3.25

3.27

29-Oct-20

115

3.95

4.00

26-Nov-20

143

4.30

4.37

28-Jan-21

206

4.65

4.78

 

Rates are valid till 01:45pm today (06-Jul-2020)

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


Nova Merchant Bank Limited Bond

Nova Merchant Bank Limited ("Nova Bank" or the "the issuer") is seeking to raise up to N10.0bn 7-year Fixed Rate Subordinated Unsecured Bonds via a funding vehicle- NOVAMBL INVESTMENTS SPV PLC ("NOVAMBL SPV PLC" or "the Issuer"), under its N50.0bn debt issuance programme.

 

Nova Merchant Bank Limited is a licensed merchant bank in Nigeria rated BBB by Agusto & Co. and A+ by Datapro. The Bank intends to use the proceeds from the bond issuance to invest in long-term risk assets, as part of its medium-term growth strategy. Proceeds of the Bond issue will also serve as Tier-II capital for the Bank, within the requirements of the Central Bank of Nigeria.

 

Please see below the terms of the offer:

 

Issuer

NOVAMBL Investments SPV PLC

Programme Size

Up to N50.0 billion

Issuer Rating

Data Pro (A); Agusto (Bbb-)

Description

Subordinated Unsecured

Issue size

Up to N10.0bn

Tenor

7 years

Effective Yield (%)

12.00%-12.50%

Par Value /Issue Price

N1000 per Unit

Subscription

Minimum of N10.0 million and multiples of N1,000,000 thereafter

Coupon Basis

Fixed Rate, semi-annual

Offer Open Date

Tuesday, 30 June 2020

Offer Close/Allotment Date

Wednesday, 8 July 2020

Settlement Date

Wednesday, 15 July 2020

 

Offer valid till 9:00am on (08-Jul-2020)

*Please note that the minimum subscription for this offer is N10,000,000.00

 

FGN Bonds Update: FGN Bonds Market Sustains Bullish Trend as Average Yield Contracts 69bps W-o-W

In spite of the liquidity squeeze that lingered for most of the week, the bullish trend in the FGN bonds secondary market persisted as investors continued to demand for instruments across the yield curve. Consequently, average yield shed 69bps W-o-W to close at 8.1% on Friday.

 

Notably, most bids were observed at the top and mid sections of the curve. The Jul-30, Jan-26 and Feb-28 bonds were the most sought after; shedding 204bps, 133bps and 123bps W-o-W respectively.

Going into the week, we believe that demand, albeit mild, will be witnessed as local investors continue to drive performance in the domestic debt market. We also anticipate the release of Q3:2020 bond issuance calendar by the Debt Management Office ("DMO")

 

Our recommendation is for investors to cherry pick attractive instruments across the curve. Investors can also consider available corporate bond issuances such as the 7-year Nova Merchant Bank Limited Bond offer closing this week.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

1

2.20

14.50

112.41

Jan-22

2

2.30

16.39

121.45

Apr-23

3

3.80

12.75

123.61

Mar-24

4

4.50

14.20

132.61

Mar-25

5

4.30

13.53

138.98

Jan-26

6

6.10

12.50

129.72

Mar-27

7

7.20

16.29

147.59

Feb-28

8

7.40

13.98

137.83

Apr-29

9

7.45

14.55

145.22

Jul-34

14

8.85

12.15

126.21

Mar-36

16

9.05

12.40

127.76

Apr-37

17

8.95

16.25

162.76

Apr-49

29

10.00

14.80

145.07

 

Rates are valid till 01:45pm today (06-Jul-2020)

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

 

Proshare Nigeria Pvt. Ltd.


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3.      Rates Fall Again As Local Demand Piles Up At NTB Auction

4.      FGN Bond Yields Still Give Way Despite Improved Offers Across The Curve

5.      Treasury Bill Auction Holds On Wednesday July 1st, 2020

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7.      Coming Soon: NOVAMBL Investments SPV Plc N10bn Series Bond Issuance

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9.      The Bears Resurface as Average Yield Inches 7bps WoW Due to Tight System Liquidity

10.  Bond Bulls Resumed Demand For FGN Bonds After The Previous Day's Pull-Back

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