Bonds & Fixed Income | |
Bonds & Fixed Income | |
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PROSHARE |
Monday, January 18, 2021 / 02:15 PM / By Afrinvest Research /
Header Image Credit: Clearview
Last week, trading in the Nigerian Treasury Bills ("NT-Bills")
secondary market started-off on a quiet note against the backdrop of depressed
yields in the market. There were minimal trading activities recorded as weak
investor sentiments continued to drag activity in the space. Consequently,
average yields expanded across the curve by 8bps W-o-W to 0.5% from 0.4% the
previous week.
In more detail, the most sell-offs were witnessed at
the longer-end of the curve as yields on the 25-Nov-21, 11-Nov-21
and 28-Oct-21 instruments expanded 25bps, 23bps and 20bps W-o-W
respectively. Similarly, the medium-term NT-Bills advanced 2bps W-o-W to 0.4%
while short-term NT-Bills remained unchanged with minimal interest from
investors.
On Wednesday, the Central Bank of Nigeria ("CBN")
conducted a Primary Market Auction ("PMA") where a total of N232.4bn
was offered across the 91- (N12.8bn), 182- (N26.7bn), and 364-Day
(N193bn) tenors. The offer maintained a strong level of demand as its
total bid-to-cover ratio stood at 1.2x (N286.1bn total
subscribed). All tenors were oversubscribed with investor demand
strongest at the 91-Day instrument which was oversubscribed by 1.8x (N12.8bn
offered against N23.6bn subscribed). In addition, stop rates on the
short, medium, and long-term instruments improved to 0.5%, 1.0% and 1.5%
respectively.
Please see a detailed summary of the PMA in the table
below:
13-Jan-21 |
13-Jan-21 |
13-Jan-21 |
|
Allotment / Issue Date |
14-Jan-21 |
14-Jan-21 |
14-Jan-21 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount ( |
26,600,000,000 |
193,000,000,000 |
|
Total Subscription ( |
23,572,253,000 |
30,626,322,000 |
231,928,722,000 |
Allotment ( |
15,915,252,000 |
25,372,322,000 |
65,931,722,000 |
Range of Bid Rates (%) |
0.0300 - 1.9900 |
0.3800 - 2.7550 |
0.8000 - 7.0000 |
Stop Rates (%) |
0.50 |
1.00 |
1.50 |
Previous Stop Rates (%) |
0.04 |
0.50 |
1.21 |
Bid-to-Cover Ratio |
1.8x |
1.2x |
1.2x |
Allotment Ratio |
0.7x |
0.8x |
0.3x |
On Thursday, the Apex Bank conducted its customary
Open Market Operations ("OMO") auction, offering a total of N80.0bn
across the 96-, 180- and 362-Day tenors which received a total subscription of N619.5bn
(7.7x total bid-to-cover ratio). All tenors were
oversubscribed with the most demand recorded on the 362-Day offer, which had a
bid-to-cover ratio of 8.4x. Furthermore, stop rates across the short, medium
and long-term instruments remained unchanged at 1.5%, 4.3% and 5.7%
respectively.
This week, we
expect the lukewarm sentiments from investors to persist given the current
subdued yields in the secondary market despite the scheduled boost in liquidity
levels (which stood at N242.9bn long as at Friday) from maturing OMO bills worth N226.3bn. Thus, investors are advised to
take position in instruments which advanced across the yield curve.
Please see
indicative secondary market NT-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
29-Apr-21 |
101 |
1.30 |
1.30 |
13-May-21 |
115 |
1.40 |
1.41 |
15-Jul-21 |
178 |
1.93 |
1.95 |
16-Sep-21 |
241 |
2.40 |
2.44 |
25-Nov-21 |
311 |
2.66 |
2.72 |
Rates are valid till 01:45pm today
(18-Jan-21)
*Please note that the minimum subscription
for T-Bills is N100, 000.00
FGN Bonds Update: Bearish Performance
Persists as Average Yield Rises 30bps W-o-W to 6.7%
The bearish performance in the FGN bonds secondary
market was sustained last week as investors continued to trade cautiously in
anticipation of the Q1:2021 Bond PMA calendar alongside December 2020 inflation
data (15.8%) released by the National Bureau of Statistics ("NBS") on
Friday. As a result, average yield across all tenors inched northwards by 30bps W-o-W to settle at
6.7% from 6.4% the previous week.
Major selloffs were witnessed on the 23-Feb-28,
17-Mar-27 and 18-Apr-37 maturities with yields rising by 143bps,
141bps and 67bps W-o-W respectively.
This week, the Debt Management Office ("DMO")
is slated to conduct a PMA on Wednesday, where a total of N150bn
will be offered across the MAR 2027, MAR 2035 and JUL 2045
instruments.
Please see
details of the bonds auction below:
Bonds |
16.2884% FGN MAR 2027 |
12.50% FGN MAR 2035 |
9.80% FGN JUL 2045 |
(Re-opening) |
(Re-opening) |
(Re-opening) |
|
Term-To-Maturity |
6 Years, 2 months |
14 Years, 2 months |
24 Years, 6 months |
Offer Amount ( |
50,000,000,000 |
50,000,000,000 |
50,000,000,000 |
Previous Stop Rates |
7.8700% |
9.3500% |
9.7500% |
Furthermore, we expect a bearish start
of the week as investors wait on the side-lines in anticipation of the PMA
slated for Wednesday and envisage an improvement in demand levels as the week
progresses due to possible unmet bids from the PMA that may filter into the
secondary market. Therefore, investors are advised to cherry pick instruments
with relatively attractive yields along the curve.
Please see below FGN Bonds secondary market rates:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Jan-22 |
2 |
1.10 |
16.39 |
115.47 |
Apr-23 |
3 |
2.20 |
12.75 |
123.25 |
Mar-24 |
4 |
3.25 |
14.20 |
132.57 |
Mar-25 |
5 |
4.30 |
13.53 |
134.95 |
Jan-26 |
6 |
5.50 |
12.50 |
130.28 |
Mar-27 |
7 |
5.85 |
16.29 |
153.34 |
Feb-28 |
8 |
6.30 |
13.98 |
143.38 |
Jul-34 |
14 |
7.80 |
12.15 |
135.91 |
Mar-36 |
16 |
8.00 |
12.40 |
138.23 |
Apr-37 |
17 |
8.00 |
16.25 |
174.25 |
Apr-49 |
29 |
8.05 |
14.80 |
174.81 |
Rates are
valid till 01:45pm today (18-Jan-21)
*Please note that the minimum subscription
for FGN Bonds is N20,000,000.00
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