Bullish Run Sustained as Average Yield Declines 4bps WoW to 4.39%

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Monday, January 17, 2022 / 05:50 PM / by Afrinvest Research / Header Image Credit: phive2015; iStock


Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market maintained its bullish run as investors anticipated the Primary Market Auction ("PMA") that held last Wednesday (12-Jan-2022). As the week progressed, tepid sentiments were maintained with minimal trading activities despite buoyant system liquidity (N63.2bn long as of Friday). Consequently, average yield contracted 4bps W-o-W to settle at 4.39% from 4.43% the previous week.


In more detail, most demand was witnessed on medium and long-term instruments as their average yields (3.73% and 5.13%) dipped 7bps and 4bps W-o-W respectively. Specifically, the 31-Mar-2022(-39bps W-o-W) and 14-Jul-2022(-37bps W-o-W) bills enjoyed the most buying interests.

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At the PMA, the Apex bank offered a total of N77.6bn across the 91-, 182- and 364-Day instruments. The offer maintained a significant level of demand as it recorded a total bid-to-cover ratio of 1.46x (
N77.6bn offer vs. N113.1bn subscription). Furthermore, stop rates on the 91- and 182-Day maturities were relatively stable while the 364-Day offer was cleared at 5.50%, advancing 60bps from 4.90%.

Please see a detailed summary of the NT-Bills PMA below:

Auction Date

12-Jan-22

12-Jan-22

12-Jan-22

Allotment / Issue Date

13-Jan-22

13-Jan-22

13-Jan-22

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

4,220,558,000

7,459,979,000

65,931,722,000

Subscription (N)

2,493,776,000

2,263,973,000

108,306,605,000

Allotment N

2,187,776,000

1,457,973,000

53,899,205,000

Range of Bid Rates (%)

2.45 – 5.25

3.20 – 6.75

4.59 – 7.69

Previous Stop rates (%)

2.49

3.45

4.90

Stop Rates (%)

2.50

3.44

5.50

Subscription ratio

0.6x

0.3x

1.6x

Allotment ratio

0.9x

0.6x

0.5x


Going into the week, we anticipate improved demand as investors channel their unfilled PMA bids to the secondary market. In addition, system liquidity is expected to be bolstered by Open Market Operations ("OMO") maturities worth N88.4bn. Thus, we advise investors to trade cautiously and take advantage of relatively attractive yields along the curve.
 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

31-Mar-22

73

3.75

3.78

26-May-22

129

4.85

4.93

9-Jun-22

143

5.15

5.26

14-Jul-22

178

5.83

6.00

25-Aug-22

220

6.75

7.04

9-Sep-22

235

7.05

7.39

Rates are valid till 01:45 pm today [17-Jan-22]
*Please note that the minimum subscription for NT-Bills is N100,000.00
 

 FGN Bonds Update: Average Yield Dips 7bps W-o-W to 11.51%

 

The domestic bonds secondary market recorded a bullish run last week as FGN bonds market players reacted to the release of the Q1:2022 FGN Bond issuance calendar by the Debt Management Office ("DMO") where a new maturity (2042s) will be offered in the market. Consequently, average yield shed 7bps W-o-W to settle at 11.51% from 11.59% the previous week.

Specifically, average yields on the short and long tenors (8.45% and 12.78%) witnessed the most buying interest (-14bps W-o-W) and (-8bps W-o-W) as yields on JUL-2034, APR-2023 and JAN-2026 contracted -41bps, -29bps and -21bps W-o-W respectively.

This week, the DMO is scheduled to conduct a PMA on Wednesday (19-Jan-22).

Please see more details in the table below:

BONDS

12.50% FGN JAN 2026

FGN JAN 2042

 

Re-opening

New Issue

Term to Maturity

4Years

20Years

Offer Amount (bn N)

70 - 80

70 - 80


Going into the week, we expect quiet trading sessions at the beginning of the week as investors anticipate the PMA scheduled to hold on Wednesday (19-Jan-22). We therefore advise investors to take advantage of maturities with relatively attractive yields across the curve, particularly at the shorter and longer end of the curve.


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Please see below FGN bonds secondary market rates:

Maturity

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

6.30

12.75

107.76

Mar-24

3

8.30

14.20

111.41

Mar-25

4

9.65

13.53

110.38

Jan-26

5

10.55

12.50

106.24

Mar-27

6

11.35

16.29

118.86

Feb-28

7

11.55

13.98

110.40

Jul-34

13

11.75

12.15

102.58

Mar-36

15

12.10

12.40

101.97

Apr-37

16

12.10

16.25

128.52

Apr-49

28

12.40

14.80

118.57

Rates are valid till 01:45 pm today [17-Jan-22]

*Please note that the minimum subscription for FGN Bonds is ₦20,000,000.00


Proshare Nigeria Pvt. Ltd.


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3.      The Bulls Opened the Year's Performance as Average Yield Declines 1bp WoW to 4.39%

4.      NGX Lists Two FGN Savings Bonds Issued in December 2021

5.      NGX Lists Supplementary FGN Bonds Issued in December 2021

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