Bearish Momentum Sustained as Average NT-Bills Yield Advances 32bps WoW to 0.45%

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Monday, December 14, 2020  / 02:42 PM / by Afrinvest Research / Header Image Credit: Macmilan Dictionary



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Last week, trading in the secondary market kicked off on a quiet note as investors anticipated the NT-Bills Primary Market Auction ("PMA") on Wednesday. As a result, the Nigerian Treasury Bills ("NT-Bills") secondary market sustained its bearish run for the second week in a row with liquidity levels decent at N312.1bn long as at Friday (11-Dec-20).

 

In more detail, the most selloffs were experienced in the short and long-dated instruments, particularly the 28-Jan-21 (+35bps), 25-Feb-21 (+35bps) and 28-Oct-21 (+36bps) maturities which advanced W-o-W.


At the PMA, the Apex bank offered N50.9bn worth of NT-Bills as against the N103.0bn total subscription translating to a bid to cover ratio of 2.0x vs 2.9x at the previous auction.

 

All tenors were oversubscribed with the 91-Day instrument recording the most interest, oversubscribed by 10.9x (N4.4bn offered against N48.1bn subscribed). Consequently, the stop rate for the 91-Day instrument marginally declined 1bp while the stop rates on the 182-Day and 364-Day tenors interestingly soared to 0.6% and 3.2% respectively as the CBN fully allotted the amount offered.

 

Please see a detailed summary in the table below:

Auction Date

09-Dec-20

09-Dec-20

09-Dec-20

Allotment / Issue Date

10-Dec-20

10-Dec-20

10-Dec-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

4,405,140,000

7,820,805,000

38,700,000,000

Total Subscription (N)

48,128,654,000

12,127,501,000

42,711,965,000

Allotment (N)

4,405,140,000

7,820,805,000

38,700,000,000

Range of Bid Rates (%)

0.0100-2.2150

0.0400-2.1000

0.0800-3.4000

Stop Rates (%)

0.0100

0.6000

3.2000

Previous Stop Rates (%)

0.0215

0.0900

0.1500

Bid-to-Cover Ratio

10.9x

1.5x

1.1x

Allotment Ratio

0.1x

0.6x

0.9x

 

On Thursday, the CBN also conducted an Open Market Operation ("OMO") auction, offering a total of N50.9bn across the 117-Day, 187-Day and 362-Day instruments. This was met with a total subscription of N314.6bn, showing a bid to cover ratio of 2.2x, 2.4x, and 5.4x across the short-, medium- and long-term bills respectively.

 

We expect investor sentiment to remain calm due to relatively low yields on offer in the secondary market. However, we may witness renewed momentum in demand towards the end of the week as maturing investments in OMO (N103.1bn) hits the financial system

 

Nevertheless, we expect the CBN to maintain its pace of mopping excess liquidity to keep the system liquidity in place.

 

Investors can hunt for bargains in attractive instruments that advanced last week across the yield curve.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

25-Feb-21

73

1.00

1.00

13-May-21

150

1.65

1.66

1-Jul-21

199

2.10

2.12

26-Aug-21

255

2.35

2.39

14-Oct-21

304

2.71

2.77

Rates are valid till 01:45pm today (14-Dec-2020)


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

 

FGN Bonds Update: PMA Holds on Wednesday; Bearish Sentiment Resumes as Average Yield Advances 65bps W-o-W to 4.7%


Last week, the FGN bonds market experienced a halt in the bullish momentum that have been sustained for several weeks as investors anticipate to book profit off the primary market bond auction that holds on Wednesday.  As a result, average yield increases by 65bps W-o-W to 4.7% (from 4.1% the previous week) with the short and long tenor maturities witnessing the most selloffs, particularly the Mar-35 (+202bps), Mar-36 (+234bps) and Jul-45(+153bps).

 

Performance in the FGN bond space was bearish as average yield increased 65bps W-o-W due to sell offs primarily on the short-dated bonds (+234bps) at the start of the week. In the same vein, the long-term bonds advanced 1.5% as investors reacted to the soar in rates at the long-end of the NT-Bills PMA auction.

 

Going into the week, we expect quiet trading sessions in the secondary market as players anticipate the bond auction the Debt Management Office ("DMO") of Nigeria is slated to conduct on Wednesday offering a total of N60.0bn across two re-opening bonds.

 

Please see more details in the table below:

BOND

12.50% FGN MAR 2035

9.80% FGN JUL 2045

15-Yr Re-opening

25-Yr Re-opening

Term to Maturity

14 Years, 3 months

24 Years, 7 months

Offer Amount (bn N)

30,000,000,000

30,000,000,000

 

Investors are advised to cherry-pick attractive yields especially at short-medium end of the curve following sell-offs witnessed last week while, qualified market players can also take advantage of the bond PMA while.


Please see indicative secondary market bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

1.20

16.39

116.79

Apr-23

3

1.30

12.75

126.62

Mar-24

4

1.50

14.20

140.14

Mar-25

5

1.80

13.53

148.05

Jan-26

6

4.30

12.50

137.20

Mar-27

7

4.60

16.29

162.92

Feb-28

8

4.60

13.98

156.86

Jul-34

14

6.20

12.15

154.10

Mar-36

16

6.30

12.40

159.23

Apr-37

17

6.30

16.25

200.60

Apr-49

29

6.70

14.80

202.23

Rates are valid till 01:45pm today (14-Dec-2020)


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

 

Proshare Nigeria Pvt. Ltd.


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