Average Yield Advances 47bps on Sell-offs, PMA Oversubscribed

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Monday, August 31, 2020 / 12:26 PM / By Afrinvest Research / Header Image Credit: Nig Directory

 

Proshare Nigeria Pvt. Ltd.


Last week, performance in the NT-Bills secondary market was mixed albeit more bearish despite buoyant system liquidity (N509.0bn long on Thursday). Although, unfilled bids (N24.3bn) from the Primary Market Auction ("PMA") filtered into the secondary market on Friday, major sell-offs were witnessed at the medium-end of the curve - 28-Jan-21 (+81bps) and 14-Jan-21 (+64bps). Consequently, average yield across all tenors shed 47bps to close at 2.0% on Friday.


At the PMA, the Apex bank offered a total of N197.6bn worth of NT-Bills across the three tenors and this was 1.1x oversubscribed as subscription totaled N221.9bn. Interestingly, the 91- and 182-day bills were oversubscribed while the 364-day instrument recorded a bid-to-cover ratio of 0.9x. Subsequently, the CBN allotted total offered amount of N197.6bn with stop rates on the 182- and 364-day bills advancing by 41bps and 14bps respectively.


Please see a detailed summary of the PMA results below:

Auction Date

26-Aug-20

26-Aug-20

26-Aug-20

Allotment / Issue Date

27-Aug-20

27-Aug-20

27-Aug-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

20,372,790,000

31,751,846,000

145,475,021,000

Total Subscription (N)

31,184,797,000

56,371,116,000

134,365,394,000

Allotment (N)

20,372,790,000

55,850,000,000

121,376,867,000

Range of Bid Rates (%)

1.0000 - 1.5999

1.2400 - 3.0000

2.8000 - 12.8000

Stop Rates (%)

1.1450

1.8000

3.3400

Previous Stop Rates (%)

1.2000

1.3890

3.1999

Bid-to-Cover Ratio

1.5x

1.8x

0.9x

Allotment Ratio

0.7x

1.0x

0.9x

 

The CBN also conducted an Open Market Operation ("OMO") auction on Thursday where a total of N100.0bn was offered across the 89- (N10.0bn), 187- (N10.0bn) and 362-day (N80.0bn) instruments. The bid-to-cover ratios across the short, medium and long term instruments were 2.0x, 1.0x and 0.9x respectively. Consequently, allotments were issued at marginal rates of 4.9% (89-day), 7.7% (180-day) and 8.9% (362-day).


On the back of expected OMO maturities worth N321.5bn this Thursday, we anticipate an uptick in activities at the secondary market which should pressure yields. Investors are advised to take advantage of attractive instruments across the yield curve while looking out for corporate offerings such as Commercial Paper issuances.


Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

8-Oct-20

38

2.85

2.86

26-Nov-20

87

3.40

3.43

28-Jan-21

150

4.05

4.12

28-Apr-21

240

4.50

4.64

10-Jun-21

283

4.70

4.88

Rates are valid till 01:45pm today (31-Aug-2020)

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

 

FGN Bonds Update:  Mixed Sentiments Witnessed as Average Yield Sheds 2bps WoW

In a similar vein, performance in the bonds market was mixed although slightly bullish. The week started off on a bearish note following sell-offs amid the absence of significant bids. However, buying interests from local market players particularly the Pension Fund Administrators ("PFAs") buoyed demand on Friday.

The MAR-36 (-58bps) and JAN-22 (-49bps) instruments had the most buying interests while on the flip side, investors booked profits on the MAR-27 (+32bps) and JUL-34 (+28 bps). Consequently, average yield declined by 2bps to close at 8.0% on Friday.


On the back of the anticipated improvement in system liquidity and the absence of a Primary Auction this week, we do not rule out the possibility of a bullish session as investors position across the curve. Our recommendation is for investors to cherry pick attractive instruments with cheaper prices 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

3.15

16.39

118.04

Apr-23

3

4.45

12.75

120.55

Mar-24

4

4.55

14.20

131.17

Mar-25

5

4.50

13.53

136.84

Jan-26

6

6.00

12.50

129.55

Mar-27

7

7.00

16.29

148.08

Feb-28

8

7.05

13.98

139.74

Apr-29

9

7.45

14.55

144.66

Jul-34

14

8.75

12.15

126.99

Mar-36

16

8.85

12.40

129.66

Apr-37

17

9.05

16.25

161.27

Apr-49

29

9.20

14.80

156.21

Rates are valid till 01:45pm today (31-Aug-2020)

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


Proshare Nigeria Pvt. Ltd.


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