Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday,
December 16, 2019 /2:12 PM / By Afrinvest Research /
Header Image Credit: Invest Advocate
The
demand in the Nigerian Treasury bills ("NT-Bills") secondary market last
week intensified as the impact of the CBN's policy to restrict domestic
investors from the OMO market coupled with robust system liquidity levels
continued to bolster market sentiments. Consequently, average NT-Bills yield
across all tenors further declined 98 bps W-o-W to settle at 6.3% on Friday.
Most buying interests were witnessed at the short and medium end of the curve,
particularly the 16-Jan-20 (-229bps), 12-Mar-20(-228bps) and 15-Oct-20
(-216bps) maturities.
At
the Primary Market Auction ("PMA") which held on Wednesday,
the Central Bank of Nigeria ("CBN") offered N45.0bn
worth of NT-Bills as against the N292.6bn total subscription,
translating to a bid to cover ratio of 6.5x. All tenors were oversubscribed
with the 91-day instrument enjoying the most interest. Consequently, the
marginal rates across all tenors declined by 1.5%, 1.1% and 1.5% respectively.
Please
see a detailed summary in the table below:
11-Dec-19 |
11-Dec-19 |
11-Dec-19 |
|
Allotment / Issue Date |
12-Dec-19 |
12-Dec-19 |
12-Dec-19 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount ( |
5,000,000,000 |
10,000,000,000 |
30,000,000,000 |
Total Subscription ( |
53,855,286,000 |
46,283,061,000 |
192,434,283,000 |
Allotment ( |
1,800,000,000 |
4,500,000,000 |
38,700,000,000 |
Range of Bid Rates (%) |
5.0000-7.5000 |
5.0000-8.5000 |
6.4000-13.4000 |
Stop Rates (%) |
5.0000 |
6.1900 |
6.8800 |
Previous Stop Rates (%) |
6.4950 |
7.2300 |
8.3700 |
Bid-to-Cover Ratio |
10.8x |
4.6x |
6.4x |
Allotment Ratio |
0.03x |
0.1x |
0.2x |
Furthermore,
the CBN sustained its weekly OMO intervention on Thursday offering a total of N289.1bn
across the 89-day, 180-day and 362- day tenors. This was met with a total
subscription of N359.8bn, showing a 1.2x bid to cover ratio across the
long-term bill with the short and medium tenor bills receiving "no sale".
Notwithstanding, the stop rate for the long tenor instrument cleared at 13.28%,
2bps lower than the previous auction.
Going
into this week, we expect inflows from maturing NT-Bills (N22.0bn), OMO
bills (N51.3bn) as well as the unfilled bids from the PMA (c. N247bn)
to further bolster liquidity. As a result, we anticipate that the Apex bank
will maintain its pace of excess liquidity mop-ups to keep system liquidity in
check.
Investors are advised to take advantage of NT-Bills
with attractive yields and other short term FGN Bonds (2-3 TTM) as decline in
yields may likely persist this week.
Please see indicative secondary market T-Bills rates
below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
30-Jan-20 |
45 |
6.00 |
6.04 |
2-Apr-20 |
108 |
6.10 |
6.21 |
13-Aug-20 |
241 |
6.50 |
6.79 |
24-Sep-20 |
283 |
6.70 |
7.07 |
29-Oct-20 |
318 |
7.00 |
7.45 |
Rates are valid till 01:45pm today (16-Dec-2019)
*Please note that the minimum subscription for T-Bills
is N100,000.00
FGN Bonds Update: Average Yield Contract 79bps W-o-W on Improved
Domestic Demand; Bond Primary Auction Holds This Wednesday
In
tandem with the NT-Bills market, activities in the Bond market last week
remained bullish owing to improved local demand that stemmed from the declining
yield environment in the NT-Bill secondary market.
Thus,
average yields contracted 79bps W-o-W to settle at 10.8% from 11.6% the
previous week. Major buying interests were recorded on the short and medium end
of the yield curve particularly the 13-Feb-19 (-175bps), 15-Jul-21 (-136bps)
and 23-Feb-28 (-90bps) maturities.
This
week, the Debt Management Office (DMO) is expected to offer N150.0bn at the FGN
Bond auction- comprising of N50.0bn of the APR-2023 (reopening), N50.0bn
of the APR-2029 (reopening), and N50.0bn of the APR 2049 (reopening) -to
investors.
Please
see details of this week's auction below:
BOND |
12.75% FGN APR 2023 (5- Yr Re-opening) |
14.55% FGN APR 2029 (10-Yr Re-opening) |
14.80% FGN APR 2049 (30- Yr Re-opening) |
Term-To-Maturity |
3 Years 4months |
9 Years 4months |
29 Years 4months |
Amount on Offer |
N50.0bn |
N50.0bn |
N50.0bn |
In
addition, we expect investors to trade cautiously as they anticipate the
outcome of the bond auction on Wednesday. Market players are advised to take
advantage of bonds with attractive yields as well as primary offers in the FGN
Bond spaces.
Please see indicative FGN bond rates below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price |
Jul-21 |
2 |
8.80 |
14.50 |
108.98 |
Jan-22 |
3 |
8.90 |
16.39 |
115.14 |
Apr-23 |
4 |
9.50 |
12.75 |
110.65 |
Mar-24 |
5 |
10.20 |
14.20 |
115.32 |
Mar-25 |
6 |
10.25 |
13.53 |
115.25 |
Jan-26 |
7 |
10.70 |
12.50 |
110.23 |
Mar-27 |
8 |
10.75 |
16.29 |
130.33 |
Feb-28 |
9 |
10.75 |
13.98 |
120.29 |
Jul-34 |
15 |
10.82 |
12.15 |
113.62 |
Mar-36 |
17 |
10.82 |
12.40 |
116.19 |
Apr-37 |
18 |
10.85 |
16.25 |
147.05 |
Apr-49 |
30 |
11.95 |
14.80 |
128.10 |
Rates are valid till 01:45pm today (16-Dec-2019)
*Please note that the minimum subscription for T-Bills is N20,000,000.00
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