Average Yield Rises 2bps WoW Due to Tight System Liquidity

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Monday, July 13, 2020 / 01:10 PM / By Afrinvest Research / Header Image Credit: Smallmouth


 Proshare Nigeria Pvt. Ltd.


The Nigerian Treasury Bills ("NT-Bills") secondary market last week traded with mixed sentiments largely driven by depressed liquidity levels. At the start of the week, system liquidity opened negative at - N95.2bn following the previous week's CRR debit by the CBN. This triggered mild selloffs as well as increased borrowings from the CBN's standing lending facility which further worsened system liquidity (- N273.6bn) on Wednesday.

 

However, sentiments slightly improved on Thursday as combined inflows from Open Market Operations ("OMO") maturities worth N 92.5bn and a late CRR refund (c. N300.0bn) ushered in trickles of demand on the short- term bills.

 

Overall, average yield across the yield curve ticked higher by 2bps W-o-W to settle at 2.1% with system liquidity closing at N128.3bn long on Friday. Notably, most of the selloffs occurred at the belly of the yield curve: 29-Oct-20 (+47bps), 12-Nov-20 (+40bps) and 26-Nov-20 (+33bps) bills.

 

Looking ahead, the Apex bank is scheduled to roll over maturing NT-Bills worth N107.1bn through a Primary Market Auction ("PMA") auction on Wednesday.

 

Please see below our PMA expectations

TENOR

91- DAY

182 - DAY

364 - DAY 

Offer Amount

5,850,000,000

26,600,000,000

74,600,000,000

Previous Stop Rate

1.7890%

1.9100%

3.3900%

Expected Stop Rate Range

1.7800 - 1.800%

1.900% - 1.9500%

3..400% - 3.4500%

 

We also expect an improvement in demand due to inflows from both maturing OMO instruments (N146.9bn) and bond coupon payments (N105.0bn). Notwithstanding, we expect investors to trade cautiously in anticipation of the PMA. Additionally, the CBN may likely conduct an OMO auction to keep rates and system liquidity in check.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

27-Aug-20

45

2.60

2.61

24-Sep-20

73

3.35

3.37

26-Nov-20

136

4.10

4.16

28-Jan-21

199

4.45

4.56

13-May-21

304

4.71

4.90

Rates are valid till 01:45pm today (13-Jul-20)

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

 

FGN Bonds Update: Bearish Sentiments Resurface as Average Yield Advances to 8.0% on Tight System Liquidity

 

Against the backdrop of the liquidity squeeze, the rally in the domestic bond market also ended last week as average yield advanced 16bps W-o-W to settle at 8.0%. Specifically, selloffs were more pronounced on the short- dated bonds following gains on the 27-Apr-2023 (+136bps), 15-Jul-2021 (+111bps), and 14-Mar-2024 (+84bps) instruments. Conversely, yields on medium and long-term bonds declined 12bps and 3bps W-o-W respectively due to mild buying interests.

 

Going into the week, we envisage inflows from bond coupon payments (N105.0bn) to stimulate demand as investors seek to re-invest some of their funds amidst the relatively attractive yields across the yield curve.

 

Furthermore, we anticipate the release of the Q3:2020 FGN Bond issuance calendar by the Debt Management Office("DMO") which could also sway market sentiments. Investors are thus advised to trade guardedly.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

1

2.30

14.50

112.07

Jan-22

2

2.70

16.39

120.51

Apr-23

3

3.10

12.75

125.58

Mar-24

4

3.60

14.20

136.11

Mar-25

5

4.60

13.53

137.29

Jan-26

6

6.30

12.50

128.55

Mar-27

7

7.30

16.29

146.81

Feb-28

8

7.40

13.98

137.76

Jul-34

14

9.40

12.15

121.17

Mar-36

16

9.40

12.40

124.32

Apr-37

17

9.35

16.25

157.80

Apr-49

29

10.15

14.80

143.12

Rates are valid till 01:45pm today (13-Jul-2020)

 

*Please note that the minimum subscription for T-Bills is N20,000,000.00


 Proshare Nigeria Pvt. Ltd.


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 Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

 

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