Bonds & Fixed Income | |
Bonds & Fixed Income | |
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PROSHARE | |
PROSHARE |
Monday, October 21, 2019 / 02:54 PM / By Afrinvest Research / Header Image Credit: bizwatchnigeria
The bullish streak in the Treasury Bills ("T-Bills") secondary
market continued last week for a fourth consecutive week amidst the CBN
intervention at the Primary Market Auction("PMA") on Wednesday as well
as its Open Market Operation ("OMO") on Thursday. The upbeat in demand
was largely sustained by the buoyant system liquidity levels that was recorded
on 4 out the 5 trading sessions (c.N676.4bn on Thursday before closing
the week at negative N220.9bn).
Consequently, yields remained pressured as average yield across tenors
dipped further by 14bps W-o-W to settle at 12.4% on Friday. Major buying
interests were witnessed at the medium and long dated tenors, particularly,
27-Feb-20 (-84bps), 10-Sep-20 (-83bps) and 12-Mar-20 (-83bps) maturities.
At the PMA on Wednesday, the CBN offered N121.9bn worth of
T-Bills as against the N634.1bn total subscription, translating to a bid
to cover ratio of 5.2x (vs. the 2.5x recorded at the previous auction). All
tenors were oversubscribed with the 182-day instrument enjoying the most buying
interest relative to available offer at 10.9x bid to cover ratio. Consequently, the stop rates across all tenors declined by 0.3%, 0.6%
and 0.3% respectively as the CBN fully allotted to the total amount offered.
Please
see a detailed summary in the table below:
16-Oct-19 |
16-Oct-19 |
16-Oct-19 |
|
Allotment / Issue Date |
17-Oct-19 |
17-Oct-19 |
17-Oct-19 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount ( |
5,849,034,000 |
3,500,000,000 |
112,535,643,000 |
Total Subscription ( |
9,385,846,000 |
38,089,612,000 |
586,638,186,000 |
Allotment ( |
5,849,034,000 |
3,500,000,000 |
112,535,643,000 |
Range of Bid Rates (%) |
10.2000-11.7000 |
11.0000-12.75000 |
12.2500-17.0000 |
Stop Rates (%) |
10.8000 |
11.0000 |
12.9400 |
Previous Stop Rates (%) |
11.0845 |
11.6000 |
13.2000 |
Bid-to-Cover Ratio |
1.6x |
10.9x |
5.2x |
Allotment Ratio |
1.0x |
1.0x |
1.0x |
In
addition, the CBN conducted an OMO auction on Thursday, offering a total of N380bn
across the 91day, 182day and 364day instruments. Like the previous OMO
auctions, the 91 days and 182 days bills were grossly undersubscribed at 0.5x
and 0.7x respectively while the 364day bill was 3.0x oversubscribed (N 350.0bn
offer vs. N1.1tn subscription). As a result, the Apex bank prorated all
successful bids by 34.0%, allotting a total of
N 420.6bn to investors.
Going into this week, we expect OMO maturities
worth N338.5bn, as well as unfilled bids from last week, to bolster
system liquidity and usher demand from investors in the secondary market. Following the OMO auction this morning, where the CBN offered N100.0bn,
we still expect the Apex bank to maintain its pace of excess liquidity mop-ups
to keep system liquidity in check.
In addition, the CBN recently issued a directive
that precludes bank customers with loans (including those enjoying CBN
intervention loans) from purchasing T-Bills or OMO instruments. Investors
are therefore advised to trade cautiously and position in T-Bills and OMO
offers with attractive yields as the impact of this policy may sway demand in
the short term.
Please
see indicative secondary market T-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
21-Nov-19 |
31 |
9.25 |
9.32 |
26-Dec-19 |
66 |
9.80 |
9.98 |
23-Jan-20 |
94 |
10.50 |
10.79 |
20-Feb-20 |
122 |
10.81 |
11.22 |
23-Apr-20 |
185 |
11.00 |
11.65 |
24-Sep-20 |
339 |
11.91 |
13.39 |
15-Oct-20 |
360 |
12.06 |
13.69 |
OMO
Auction |
c.100 |
10.64 |
10.93 |
OMO
Auction |
c.200 |
11.20 |
11.86 |
OMO
Auction |
c.350 |
12.60 |
14.41 |
Rates are
valid till 01:45pm today (21-Oct-2019)
*Please note
that the minimum subscription for T-Bills is N100,000.00
FGN Bonds Market Update: Bullish Run Reversed as Average Yield Gains
2bps W-o-W
Contrary
to activities in the T-Bills space, the bullish sentiment in the Bond market
ceased last week as investors sold off their positions to take advantage of
anticipated attractive rates at the OMO auctions. As a result, average yield on
all instruments gained 2bps W-o-W to settle at 13.75% from 13.72% the previous
week. Major sell-offs were recorded on the 10-Oct-20 (+39bps), 14-Oct-20
(+36bps) and 12-Dec-20 (+36bps) maturities.
Also,
the Debt Management Office ("DMO") listed a
15.0bn Green bond (the second green bond to be issued) on the Nigerian stock
exchange during the week. The 7-yr bond which had a coupon rate on 14.50% is
targeted towards financing environmentally friendly projects.
Going
into the week, the DMO is expected to offer N150.0bn at the FGN Bond
auction- comprising N50.0bn worth of the APR-2023 (5-Yr reopening),
APR-2029 (10-Yr reopening), and N50.0bn of the APR 2049 (30-Yr
reopening) -to investors..
Please
see details of this week's auction below:
BOND |
12.75% FGN
APR 2023 (5-Yr
Re-opening) |
FGN APR 2029
(10-Yr Re-opening) |
NEW FGN APR
2049 (30-Yr Re-opening) |
Term-To-Maturity |
4 Years
6months |
9 Years
6months |
29 Years
6months |
Amount on Offer |
|
|
|
We
expect the market to open on a quiet note as
investors anticipate the outcome of the bond auction on Wednesday. Investors
are advised to take advantage of bonds with attractive yields and trading at a
discount as well as primary offers in the FGN Bond spaces.
Please see indicative bond rates for today below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price |
Jul-21 |
2 |
13.80 |
14.50 |
100.38 |
Jan-22 |
3 |
14.05 |
16.39 |
104.15 |
Apr-23 |
4 |
14.15 |
12.75 |
96.09 |
Mar-24 |
5 |
13.95 |
14.20 |
100.12 |
Mar-25 |
6 |
13.85 |
13.53 |
97.20 |
Jan-26 |
7 |
14.12 |
12.50 |
93.05 |
Mar-27 |
8 |
14.10 |
16.29 |
109.10 |
Feb-28 |
9 |
14.12 |
13.98 |
98.65 |
Jul-34 |
15 |
14.38 |
12.15 |
86.33 |
Mar-36 |
17 |
14.40 |
12.40 |
87.78 |
Apr-37 |
18 |
14.40 |
16.25 |
111.71 |
Apr-49 |
30 |
14.50 |
14.80 |
101.00 |
Rates are valid till 01:45pm
today (21-Oct-2019)
*Please note that the minimum
subscription for Bonds is N20,000,000.00
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