Bullish Streak Sustained in NT-Bills Market, Union Bank CP Available

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Monday, January 20, 2020 / 2:09 PM / Afrinvest Research / Header Image Credit: Squire Wealth Advisors

 

In line with our expectation, performance in the Nigerian Treasury Bills (NT-Bills) secondary market was bullish last week on the back of the robust system liquidity buoyed by OMO maturities worth N432.2bn. Although the week started off on a bearish note as investors sold off positions to raise liquidity for the Primary Market Auction ("PMA") that held on Wednesday, activities picked up towards the end of the week as lost bids at the auction (N192.1bn) filtered into the secondary market.

 

As a result, average yield across all tenors declined 75bps to close at 3.5% on Friday. The 15-Oct-20 (-169bps), 30-Jul-20 (-152bps) and 02-Apr-20 (-152bps) maturities enjoyed the most buying interests. 

 

At the PMA that held on Wednesday, an over-subscription was witnessed across all three tenors as investors continue to demand for these bills despite declining yields due to the shortage of alternative money market investment options. The 91-day, 182-day and 364-day instruments were 8.9x, 3.3x and 1.4x oversubscribed respectively, as a result, stop rates cleared at 2.95%, 3.95% and 5.09% for the short, medium- and long-term maturities.

 

Please see a detailed summary in the table below:

Auction Date

15-Jan-20

15-Jan-20

15-Jan-20

Allotment / Issue Date

16-Jan-20

16-Jan-20

16-Jan-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

5,849,034,000

26,600,000,000

193,000,000,000

Total Subscription (N)

52,201,693,000

87,927,934,000

277,513,208,000

Allotment (N)

5,849,034,000

26,600,000,000

193,000,000,000

Range of Bid Rates (%)

2.7400 - 6.0000

3.0000 - 6.0000

4.0000 - 14.4990

Stop Rates (%)

2.9500

3.9500

5.0900

Previous Stop Rates (%)

3.5000

4.9000

5.2000

Bid-to-Cover Ratio

8.9x

3.3x

1.4x

Allotment Ratio

0.1x

0.3x

0.7x

 

In its customary action to mop up excess system liquidity, the Apex bank conducted an OMO auction on Thursday offering a total of N180.0bn for the 362-day tenor. Although investor demand was N407.6bn - denoting a bid-to-cover ratio of 2.3x, the CBN allotted a total of N201.3bn with the stop rate clearing at 13.2% (vs.13.28% at the previous auction).

 

This week, system liquidity is expected to be bolstered by an inflow of N433.8bn from OMO maturities and we expect the CBN to conduct an auction to mop up excess liquidity. In addition, demand for secondary market bills are expected to be sustained, although this may wane as investors could opt for close alternatives such as short-term FGN bonds (with TTM of 2-3 years) and Commercial Papers offerings that are relatively more attractive.

 

In addition, the Monetary Policy Committee is scheduled to meet on Thursday and Friday to determine the monetary policy rate. 

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

27-Feb-20

38

2.20

2.21

2-Apr-20

73

2.95

2.97

14-May-20

115

3.80

3.85

24-Sep-20

248

5.00

5.18

15-Oct-20

269

5.20

5.41

Rates are valid till 01:45pm today (20-Jan-2020)

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

 

Union Bank Commercial Paper

Union Bank of Nigeria Plc ("Union Bank") is seeking to raise up to N20 billion in 180-Day and 268-Day tenors under its  N100 billion Commercial Paper ("CP") Programme to finance its working capital.


Please see below the terms of the offer: 

Issuer

Union Bank of Nigeria Plc (Union Bank)

Tenor 

180-Day

268-Day

Effective Yield (%)

5.0000

6.0000

Discount Rate (%)

4.8800

5.7475

Issuer Rating

A- (Agusto & Co.); A- (DataPro); BBB+ (GCR)

Subscription

Minimum of N5.0 million and multiples of N1,000 thereafter

Tax Considerations

Free and clear of withholding taxes

Offer Open Date

Thursday, 16 January 2020

Offer Close/Allotment Date

Tuesday, 21 January 2020

Settlement Date

Wednesday, 22 January 2020

Offer valid till 9:00am tomorrow (21-Jan-20)

*Please note that the minimum subscription for Commercial Papers is N5,000,000.00

 

FGN Bonds Update: Bullish Momentum Reversed as Average Yield Appreciates 5bps W-o-W; Primary Market Auction Scheduled for Wednesday

 

Contrary to performance in the T-Bills market last week, performance in the Bonds market was mixed albeit more bearish as investors sold off positions across tenors ahead of the bond auction scheduled to hold this week where the DMO is expected to offer a total of N155.0bn. Consequently, average yields across the curve declined by 5bps to close at 10.5% on Friday. Sell-offs were particularly intensified across mid and long-term instruments such as the Mar-25 (+38bps), Jul-34 (+26bps) and Apr-49 (+25bps) maturities.

 

This Wednesday, the Debt Management Office is scheduled to conduct the first Primary Market bond auction for the year re-opening instruments worth N155.00bn across the 5-Year (N50.00bn), 10-Year (N50.00bn) and 30-Year (N55.00bn) tenors.

 

Please see details of the auction below:

BOND

12.75% FGN APR 2023

14.55% FGN APR 2029

14.80% FGN APR 2049

(5-Yr Re-opening)

(10-Yr Re-opening)

(30-Yr Re-opening)

Term to Maturity

3 Years, 3 months

9 Years, 3months

29 Years, 3 Months

Offer Amount (N)

50,000,000,000

50,000,000,000

55,000,000,000

Previous Stop Rates

11.00%

12.00%

13.00%









Going into the week, we expect the bearish momentum to be sustained at the start of the week as investors wait on the side-lines ahead of the Wednesday auction. We however anticipate an over-subscription at the auction particularly on the longest dated bond (Apr-2049). Investors are advised to cherry pick instruments with relatively attractive yields.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jul-21

2

7.65

14.50

109.45

Jan-22

3

7.70

16.39

115.93

Apr-23

4

9.10

12.75

110.08

Mar-24

5

9.10

14.20

117.27

Mar-25

6

9.35

13.53

116.81

Jan-26

7

9.70

12.50

112.52

Mar-27

8

10.45

16.29

128.88

Feb-28

9

10.45

13.98

118.93

Jul-34

15

10.90

12.15

109.00

Mar-36

17

10.86

12.40

111.58

Apr-37

18

10.95

16.25

140.65

Apr-49

30

11.96

14.80

122.90

Rates are valid till 01:45pm today (20-Jan-2020)

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


Proshare Nigeria Pvt. Ltd.


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