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Average Yield Marginally Sheds 4bps WoW on Skeletal Flows to the NT-Bills Space Amid Weak Sentiments

Bonds & Fixed Income	699 VIEWS
Bonds & Fixed Income
699 VIEWS

Monday, May 11, 2020 / 03:27 PM /By Afrinvest Research / Header Image Credit: MissyBanker

Last week, the Nigerian Treasury Bills ("T-Bills") secondary market traded on a relatively quiet note as investors' sentiments remained fragile despite the mild uptick in system liquidity (N505.5bn long as at Friday). Consequently, average yield across tenors marginally declined by 4bps W-o-W to remain at c. 2.7% on Friday.

Slight buying interest was witnessed across tenors with the average yield on long-term bills declining the most, particularly the 12-Nov-2020 instrument which dipped 56bps W-o-W. In the same vein, the medium- and short-term bills dipped 1bp apiece to close at 2.4% and 2.6% respectively.

This week, we anticipate an increase in trading activities as the Apex bank is expected to rollover a total of N33.8bn worth of maturing NT-Bills at the Primary Market Auction ("PMA") on Wednesday.

Please see details of our expectations below:

Tenor	91-Day	182-Day	364-Day
Offer Amount (N)	4,380,000,000	12,920,000,000	16,540,000,000
Last Stop Rate (%)	1.8500	2.4900	3.84000
Expected Stop Rate Range (%)	1.4900 - 1.8900	2.4800 - 2.7900%	3.5900% - 3.900%

While we encourage investors to source for attractive NT-Bills that currently present the best domestic money market opportunity, we further advise qualified investors with a longer term perspective to take advantage of better yields on short-term bonds that advanced last week as well as possible corporate offerings such as commercial papers and bonds

Please see indicative secondary market NT-Bills rates below:

Maturity	Tenor (Days)	Rate (%) p.a.	Yield (%) p.a.
11-Jun-20	31	2.35	2.35
2-Jul-20	52	2.65	2.66
24-Sep-20	136	3.80	3.85
26-Nov-20	199	4.10	4.19
28-Jan-21	262	4.45	4.60

Rates are valid till 01:45pm today (11-May-2020)

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

FGN Bonds Update: Mixed Sentiments in FGN Bonds Market lead to Bearish Undertones; Average Yield Advances 3bps WoW

The FGN bonds market started off on a bullish note as investors with lost bids at the previous bond auction took positions across the curve. However, mixed sentiments were observed during trading sessions as investors continued to trade cautiously with offshore players on the sidelines. Thus, average yields across all tenors advanced by 3bps W-o-W to close at 10.2% on Friday.

Notably, the 23-Mar-25 (+135bps), 22-Jan-26 (+101bps), and the 18-Apr-37(+25bps) bonds witnessed the most sell offs in last week's trading session as investors took profits. As a result, yields on these instruments closed at 9.4%, 10.2% and 11.6% respectively.

This week, as we continue to observe activities in the global space for potential catalysts that could affect sentiments, we expect local investors to drive the performance of the domestic debt market.

In addition to cherry picking instruments across the bonds secondary market, our recommendation is for investors to seek more attractive alternatives on corporate offerings that might be announced.

Please see indicative FGN bond rates below:

Bond	Tenor (Years)	Yield (%)	Coupon (%)	Implied Price (N)
Jul-21	2	4.20	14.50	111.72
Jan-22	3	4.60	16.39	119.18
Apr-23	4	7.85	12.75	112.72
Mar-24	5	7.60	14.20	121.61
Mar-25	6	7.70	13.53	123.27
Jan-26	7	9.00	12.50	115.31
Mar-27	8	10.00	16.29	130.61
Feb-28	9	10.00	13.98	121.14
Apr-29	10	10.20	14.55	125.14
Jul-34	15	10.40	12.15	112.79
Mar-36	17	10.70	12.40	112.81
Apr-37	18	10.70	16.25	142.97
Apr-49	30	11.73	14.80	125.19