| Bonds & Fixed Income |    1079 VIEWS  |
| Bonds & Fixed Income | |
| 1079 VIEWS | |
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| PROSHARE | |
| PROSHARE | |
Thursday,
November 26, 2020 /10:16 AM / by United Capital Research /
Header Image Credit: Business AM Live
Yesterday, the CBN conducted a primary market auction, with
N150.6bn worth of treasury bills on offer across the 91-, 182- and 364- Day
tenor. Stop rates trended lower as the 91-day, 180-day and 364-day papers
closed at 0.02% (previously 0.035%), 0.19% (previously 0.15%) and 0.15%
(previously 0.30%), in that order. Nevertheless, demand was high, with the
three tenors being oversubscribed 2.8x, 2.9x and 3.0x, respectively, compared
with 5.1x, 2.3x and 3.8x at the last auction.
For context, the 364-day
paper, at 0.15% yield, implies that a N1.0m investment in T-bills will yield a
meagre return of N1,500 in a year, ridiculously low compared an equal
investment in the more-risky equity market, which currently has an average
dividend yield of 5.4%, implying a N54,000 return on the same N1.0m Investment
without taking into account capital gains (or loss). Notably, fundamentally
sound stocks yield considerably higher dividends than the average; for
instance, ZENITH's forecast dividend yield is estimated at 11.5%, implying a
return of N115,000, bar capital gains.
Taking
a cue from the market's reaction to the last NTB auction, we expect sustained
bullish bias for equities in the coming weeks, albeit alongside profit-taking.
The MPC's recent decision to hold the benchmark interest rate also supports
demand for equities market. Also, Bond markets have been mildly bullish
with slight buying interest observed on the short end of the yield curve,
pulling the average bond yield down1bps from Friday. We expect bond yields to
be depressed further in the coming week.
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