FGN Bond Auction Holds this Wednesday; Average Yield in NT-Bills Secondary Market Dips to 4.35%

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Monday, April 19,  2021 / 01:55 PM / by Afrinvest Research / Header Image Credit: Invest small 


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The Nigerian Treasury Bills ("NT-Bills") secondary market resumed last week on a bearish note following pressured liquidity levels (which stood at N3.8bn positive as at Monday), and as investors anticipated the Primary Market Auction ("PMA") slated for Wednesday. However, as the week progressed, pockets of demand were witnessed on mid-dated instruments along the curve.

Consequently, average yields across the curve dipped slightly by 5bps W-o-W to settle at 4.35% from 4.40% the previous week. In more detail, the 26-Aug-21 and 9-Sep-21 bills witnessed the most buying interest from investors, declining 37bps and 33bps W-o-W respectively.

 

At the PMA on Wednesday, the Central Bank's total offer of N69.6bn across the 91-, 182- and 364-Day tenors was met with significant demand, recording a total subscription ratio of 3.6x (total subscription of N247.4bn). In addition, stop rates were maintained at the short- and medium-term offers while the long-term offer increased to 9.0% (from 8.0% at the last auction)


Please see below details of the PMA:

Auction Date

14-Apr-21

14-Apr-21

14-Apr-21

Allotment / Issue Date

15-Apr-21

15-Apr-21

15-Apr-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer (N)

15,915,252,000

4,502,889,000

49,141,302,000

Subscription (N)

15,870,708,000

13,939,253,000

217,586,830,000

Allotment (N)

12,459,707,000

8,799,752,000

132,120,467,000

Range of Bid Rates (%)

2.0000-8.0000

3.4500-9.0000

7.5000-13.0000

Stop Rates (%)

2.00

3.50

9.00

Previous Stop Rates (%)

2.00

3.50

8.00

Subscription Ratio

1.0x

3.1x

4.4x

Allotment Ratio

0.8x

0.6x

0.6x


This week, we expect OMO maturities worth N10.0bn to hit the system and expect funding levels to remain pressured (N49.2bn long as a Friday). Thus, we advise investors to continue to position in relatively attractive bills across the curve while also 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.

29-Jul-21

101

2.05

2.06

16-Sep-21

150

3.15

3.19

28-Oct-21

192

4.40

4.50

10-Feb-22

297

5.14

5.36

31-Mar-22

346

6.46

6.88

Rates are valid till 01:45 pm today (19-Apr-21

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


Proshare Nigeria Pvt. Ltd.



FGN Bonds Update: Bond Auction Holds this Wednesday; Bearish Run Sustained in Secondary Market as Average Yields Advance 1.08% W-o-W to 11.45%


Last week, the FGN bonds secondary market continued its bearish run as investors exited positions following the release of March inflation data (18.17%) released by the Nigerian Bureau of Statistics ("NBS") and ahead of the upcoming PMA. As a result average yield across the curve advanced 108bps W-o-W to 11.45% from 10.37% the previous week.

Particularly, the short-dated maturities such as 27-Apr-23, 14-Mar-24, and 23-Mar-25 recorded the most sell-offs, advancing 333bps, 272bps and 202bps W-o-W respectively.

This week, the Debt Management Office ("DMO") is slated to conduct a PMA on Wednesday, where a total of N150.0bn will be offered across the MAR 2027, MAR 2035, and JUL 2045 instruments.

Please see details of the bonds auction below:

Bonds

16.2884% FGN MAR 2027

12.50% FGN MAR 2035

9.80% FGN JUL 2045

(Re-opening)

(Re-opening)

(Re-opening)

Term-To-Maturity

5 Years, 11 months

13 Years, 11 months

24 Years, 3 months

Offer Amount (N)

50,000,000,000

50,000,000,000

50,000,000,000

Previous Stop Rates

10.5%

11.5%

12.00%

 
This week, we expect reduced activity level in the FGN bonds secondary market as investors focus on the upcoming PMA. Therefore, we advise investors to take advantage of maturities that advanced along the curve.

 Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

6.30

12.75

112.07

Mar-24

3

6.60

14.20

119.76

Mar-25

4

8.20

13.53

117.57

Jan-26

5

10.80

12.50

106.16

Mar-27

6

11.10

16.29

122.02

Feb-28

7

11.10

13.98

113.53

Jul-34

13

12.00

12.15

100.93

Mar-36

15

12.10

12.40

102.02

Apr-37

16

12.20

16.25

128.20

Apr-49

28

13.00

14.80

113.43

Rates are valid till 01:45 pm today (19-April-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00 


Proshare Nigeria Pvt. Ltd.


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