Bullish Turn Persists, as Average Yield Dips 2bps WoW

Proshare

Monday, July 26, 2021 / 05:46 PM / by Afrinvest Research / Header Image Credit: Pexels 


Proshare Nigeria Pvt. Ltd.


In the Nigerian Treasury Bills ("NT-Bills") secondary market last week, average yield marginally dipped  2bps W-o-W to close at 6.80% from 6.82%  the previous week, sustaining the bullish run. Demand on mid-and long-dated maturities fueled the performance as average yields contracted 1bp and 7bps  W-o-W respectively.

A total of N216.19bn worth of maturing NT-Bills be rolled over by the Apex Bank in a Primary Market Auction ("PMA") this Wednesday.


Please see our expectations below:

Auction Date

28-July-21

28-July-21

28-July-21

Allotment Date

29-July-21

29-July-21

29-July-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Value on Offer (N)

7,193,228.0

47,476,888.0

161,522,566.0

Previous Stop Rates (%):

2.50

3.50

8.67

Expected Stop Rate Range (%):

1.80 - 2.20

2.90 - 3.50

8.00 - 8.50

 


We expect improved activity levels in the NT-Bills secondary market this week, given the buoyed liquidity levels from maturing instruments (NT-Bills: 
N216.19bn, OMO bills: N16.84bn). Thus, we advise investors to continue to position in relatively attractive bills across the curve while looking out for possible corporate offerings.


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

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

28-Oct-21

94

3.55

3.58

25-Nov-21

122

4.35

4.41

10-Feb-22

199

5.10

5.25

31-Mar-22

248

5.60

5.82

28-Apr-22

276

5.94

6.22

26-May-22

304

6.76

7.16

09-Jun-22

318

7.16

7.64

Rates are valid till 01:45 pm today (26-Jul-21)

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


 
FGN Bonds Update: Sustained Bullish Performance as Average Yield Sheds 7bps WoW to 12.09%

 
The FGN bond secondary market furthered its bullish trend last week, as investor demand ramped up towards the end of the week, given the elevated yield levels at the start of the week as unmet bids filtered in from the PMA that held on Monday. As a result, average yield across all maturities declined 7bps W-o-W to settle at 12.09% (from 12.16% the previous week) with the most buying interests recorded on the 22-Jan-26 (-17bps W-o-W) and 18-Jul-34 (-39bps W-o-W) maturities.

At the PMA, the Debt Management Office ("DMO") offer of
N150.0bn was met with a strong overall subscription of 2.1x. Interestingly, the DMO under-allotted the 2028s, but slightly over-allotted the 2036s and 2050s. Also, the highest subscription at the auction was the 2050s which had ₦156.26bn subscription. The stop yields for the 2028s and 2036s were at current market offers, while the stop yield for the 2050s was moderately lower than present market offers.

Please see a detailed summary of the FGN bond PMA below:

 

13.98% FGN FEB 2028 (Re-opening)

12.40% FGN MAR 2036 (Re-opening)

12.98% FGN MAR 2050 (Re-opening)

Term-To-Maturity

6 Years, 7 Months

14 Years, 8 Months

28 Years, 8 Months

Amount on Offer (₦)

50,000,000,000.00

50,000,000,000.00

50,000,000,000.00

Total Subscription (₦)

56,409,800,000.00

73,441,901,000.00

156,256,401,000.00

Amount Allotted: (₦)

31,713,300,000.00

51,156,600,000.00

55,201,400,000.00

All Bids Awarded At (Yield)

12.3500

13.1500

13.2500

Bid-to-Cover Ratio

1.78

1.44

2.83

Amount Bid to Offered Ratio

1.13x

1.47x

3.13x

Stop Yield

12.35%

13.15%

13.25%

Previous Auction Stop Yield

-

-

13.70%



Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

           10.30

            12.75

                  103.80

Mar-24

3

           11.10

            14.20

                  106.88

Mar-25

4

           11.50

            13.53

                  105.88

Jan-26

5

           11.60

            12.50

                  103.08

Mar-27

6

           11.80

            16.29

                  118.07

Feb-28

7

           11.85

            13.98

                  109.52

Jul-34

13

           12.25

            12.15

                    99.35

Mar-36

15

           12.50

            12.40

                    99.30

Apr-37

16

           12.45

            16.25

                  125.89

Apr-49

28

           12.50

            14.80

                  117.71

Rates are valid till 01:45 pm today (26-Jul-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Given the upcoming MPC meeting slated for the first two trading sessions of the week and the moderated yields in the FGN bonds secondary market, we expect some cautious trading from investors this week. However, we do not rule out the possibility of bargain hunting along the curve as outstanding funds from local investors filter into the secondary market. We therefore advise investors to take advantage of maturities with improved yields, particularly at the short end of the curve.


Proshare Nigeria Pvt. Ltd.


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