Average NT-Bills Yield Advances by 3bps to 1.7%; PMA Holds this Wednesday

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Monday, September 28, 2020 / 01:55 PM / By Afrinvest Research / Header Image Credit: CPD First

 

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The Nigerian Treasury Bills ("NT-Bills") secondary market closed on a bearish note last week as weak sentiments were observed in spite of healthy liquidity in the system (N768.1bn long on Friday). Minimal activities were recorded during trading sessions and as a result, average yield across all tenors rose by 3bps to approximately 1.7% (from 1.62% the previous week to 1.65%).           

 

Notably, yields on the long-term bills advanced the most, with the 13-May-21 (+28bps), 10-Jun-21 (+20bps) and 29-Apr-21 (+19bps) instruments recording the most sell offs.

 

In a bid to mop up excess liquidity in the system, the CBN conducted an Open Market Operation ("OMO") auction on Thursday. A total amount of N70.0bn (23% of total matured sum of N300.0bn) was offered and sold across the 131-, 166- and 348-day instruments. This was met with a total subscription of N246.7bn which translated to a 3.5x bid-to-cover ratio. All tenors were oversubscribed and stop rates on the short, medium and long term tenors closed at 4.8%, 7.6% and 8.7% respectively.

 

This week, the Central Bank of Nigeria ("CBN") is expected to roll over a total of N113.9bn worth of NT-Bills (N20.0bn lower than expected maturity of N133.9bn) through a Primary Market Auction ("PMA") on Wednesday.

 

Please see details of the PMA in the table below:

Auction Date

30-Sep-20

30-Sep-20

30-Sep-20

Allotment / Issue Date

01-Oct-20

01-Oct-20

01-Oct-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

10,000,000,000

17,600,581,000

86,370,499,000

Previous Stop Rates (%)

1.0900

1.5000

3.0500

Expected Stop Rate Range (%)

1.0750 - 1.2000

1.4000 - 1.9000

3.0000 - 3.3000

 

Going into the week, we expect a quiet trading session today as investors trade cautiously ahead of the PMA. However, activities should pick up towards the end of the week as lost bids from the auction might filter into the secondary market. In addition, inflows from maturing OMO bills (N18.0bn) and bond coupon payments (N41.0bn) are expected to bolster system liquidity.

  

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

29-Oct-20

31

2.55

2.56

14-Jan-21

108

3.45

3.49

28-Apr-21

212

3.95

4.04

13-May-21

227

4.40

4.52

15-Jul-21

290

4.69

4.87

Rates are valid till 01:45pm today (28-Sep-2020)

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

 

FGN Bonds Update: Strong Demand Witnessed at Bond Auction; Monetary Policy Rate Reduced to 11.5%

In line with expectations, performance in the FGN Bonds Market was bullish on the back of buoyant system liquidity. Strong demand was witnessed across all tenors and average yield on secondary market instruments shed 48bps W-o-W to close at 7.1% on Friday. Buying interests were particularly observed on the JUL-34 and MAR-35 bonds which contracted by 123bps and 112bps respectively W-o-W.

 

On Wednesday, the Debt Management Office ("DMO") raised a total of N104.0bn across the 10-year, 15-year, 25-year and 30-year re-opened instruments. The offer witnessed significant demand with a total bid-to-cover ratio of 2.5x (N145.0bn offer vs. N360.2bn subscription). Consequently, the average stop rate across the instruments offered closed lower by 84bps to 8.1%.

 

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Please see below a detailed summary of the auction:

 

12.50% JAN 2026

12.50% MAR 2035

9.80% JUL 2045

12.50% MAR 2050

Tenors:

10-Yr Re-opening

15-Yr Re-opening

25-Yr Re-opening

30-Yr Re-opening

Term-To-Maturity:

5 Years, 4 Months

14 Years, 6 Months

24 Years, 10 Months

29 Years, 6 Months

Auction Date:

23-Sep-20

23-Sep-20

23-Sep-20

23-Sep-20

Issue Date

25-Sep-20

25-Sep-20

25-Sep-20

25-Sep-20

Amount Offered:

N25.0 billion

N40.0 billion

N40.0 billion

N40.0 billion

Subscription:

N83.8 billion

N71.4 billion

N41.1 billion

N163.9 billion

Amount Allotted:

N67.0 billion

N25.4 billion

N6.8 billion

N4.6 billion

Range of Bids:

4.6800% - 9.0000%

7.3000% - 12.5000%

8.0000% - 10.4500%

8.3300% - 12.5000%

Stop Rates:

6.0000%

8.5200%

8.9000%

8.9400%

Previous Stop Rates:

6.7000%

9.3500%

9.7500%

9.9000%

Bid to Cover Ratio:

3.4x

1.8x

1.0x

4.1x

Allotment Ratio:

0.8x

0.4x

0.2x

0.0x


  

At the Monetary Policy Committee ("MPC") meeting which held last week, the Committee reduced the Monetary Policy Rate ("MPR") by 100bps from 12.5% to 11.5% while adjusting its asymmetric corridor from +200/-500bps to +100/-700bps. All other monetary policy parameters were held constant. The MPC believes that the expansionary policy will boost economic activities through the provision of cheaper credit.

 

This week, we expect a bullish performance in the bonds secondary market as investors will be seeking to fill their lost bids from the bonds PMA (c.N256.4bn). Hence, yields are expected to be pressured. We advise investors to cherry pick attractive maturities along the curve while looking out for possible corporate offerings.

 

Please see indicative secondary market bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

1.90

16.39

118.90

Apr-23

3

2.05

12.75

126.73

Mar-24

4

2.25

14.20

139.58

Mar-25

5

3.20

13.53

142.85

Jan-26

6

5.05

12.50

134.33

Mar-27

7

5.85

16.29

155.55

Feb-28

8

6.20

13.98

145.61

Apr-29

9

6.45

14.55

152.70

Jul-34

14

7.50

12.15

139.53

Mar-36

16

7.65

12.40

142.65

Apr-37

17

7.80

16.25

177.79

Apr-49

29

8.25

14.80

171.50

Rates are valid till 01:45pm today (28-Sep-2020)

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

 

Proshare Nigeria Pvt. Ltd.


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