Bullish Run Sustained as Average Yield Falls 27bps WoW

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Monday, August 09, 2021 / 02:41 PM / by Afrinvest Research / Header Image Credit: Pexels

 

Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market witnessed an improvement in activity levels on the back of stable liquidity levels (which stood at N285.4bn long as at Monday, 02-Aug-21) as average yield across all tenors fell 27bps W-o-W to close at 5.62% from 5.90% the previous week.

 

In more detail, the average yield in the short-, medium- and long-end of the curve shed 9bps, 22bps, and 39bps W-o-W respectively as yields dipped across all tenors save for the 25-Nov-21 instrument which advanced 35bps W-o-W.

 

This week, the Apex bank is scheduled to roll over maturing bills worth N57.5bn at the Primary Market Auction ("PMA") on Wednesday (11-Aug-21) across the 91-, 182-, and 364-Day tenors.


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Please see below our PMA expectations:

TENOR

91-Day

182-Day

364-Day

Offer Amount

8,435,074,000

16,056,994,000

27,000,000,000

Last Stop Rate

2.50%

3.50%

8.20%

Expected Stop Rate Range

2.00% - 3.00%

3.00% - 4.00%

8.00% - 8.50%

 

Going into the week, we expect N80.0bn and N57.5bn worth of maturing OMO bills and NT-Bills respectively to hit the system and improve system liquidity (N325.6bn long as at Friday). Consequently, we expect active participation in the NT-Bills market as investors position for the mid-week auction. Thus, we advise investors to take advantage of the attractive yields and available commercial paper offer.

 

Please see the indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

28-Oct-21

80

3.30

3.32

25-Nov-21

108

4.20

4.25

13-Jan-22

157

4.73

4.83

10-Mar-22

213

5.45

5.63

28-Apr-22

262

5.90

6.16

26-May-22

290

7.04

7.46

Rates are valid till 01:45 pm today (09-Aug-21)

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


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FGN Bond Update: Sustained Bullish Run as Average Yield Closed 11.94%

In line with our expectations, the FGN Bond secondary market sustained its bullish run as average yield across the curve declined 13bps to close at 11.94% (from 12.07% the previous week).

 

Specifically, the most buying interest was seen in the short- to medium-end of the curve as average yield shed 11bps and 22bps W-o-W to close at 9.92% and 12.32% respectively while average yield at the long-end of the curve marginally maintained its bullish run, shedding only 5bps to stop at 13.00% from 13.05% the previous week.

 

Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

             9.30

            12.75

                  105.32

Mar-24

3

             9.80

            14.20

                  109.84

Mar-25

4

           10.30

            13.53

                  109.53

Jan-26

5

           11.10

            12.50

                  104.80

Mar-27

6

           11.45

            16.29

                  119.57

Feb-28

7

           11.45

            13.98

                  111.42

Jul-34

13

           12.15

            12.15

                    99.98

Mar-36

15

           12.25

            12.40

                  100.98

Apr-37

16

           12.20

            16.25

                  127.96

Apr-49

28

           12.10

            14.80

                  121.40

Rates are valid till 01:45 pm today (09-Aug-21)

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

 

This week, we expect that activity levels will remain stable in the secondary market as investors gradually position in relatively attractive maturities in light of improved yields. Thus, we maintain our advice that investors take advantage of relatively attractive yields across all tenors in the market.


Proshare Nigeria Pvt. Ltd.

 

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 Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

 

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