Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday, November 30, 2020 / 12:20 PM / by Afrinvest Research / Header Image Credit: Novarick Homes
Last week, the weak investors' sentiment previously
recorded in the Nigerian Treasury Bills ("NT-Bills") secondary market
was sustained given the depressed yield environment. Despite the buoyant system
liquidity (N240.3bn long as at Monday), the week started out on a quiet
note and was maintained throughout with minimal trading activities witnessed on
the longer end of the curve.
Consequently, average yields contracted marginally by
1bp W-o-W to remain at 0.1%. Particularly, slight buying interest was recorded
on the long-dated maturities such as 30-Sep-21, 14-Oct-21 and 28-Oct-21
which declined 6bps, 5bps and 3bps W-o-W respectively.
At
the Primary Market Auction ("PMA") on Wednesday, the CBN offered a total
of N150.6bn worth of NT-Bills across the 91-, 182- and 364-day
tenors. The offer maintained a significant level of demand as it recorded a
total bid-to-cover ratio of 2.9x (N150.6bn offered against N445.9bn
total subscribed). All tenors were oversubscribed with investor demand
strongest at the 364-day instrument which was oversubscribed by 3.0x(N111.1bn
offered against N333.8bn subscribed). In addition, stop rates contracted
by 0.02%,0.06% and 0.15% respectively.
Please see a detailed summary in the
table below:
25-Nov-20 |
25-Nov-20 |
25-Nov-20 |
|
Allotment /
Issue Date |
26-Nov-20 |
26-Nov-20 |
26-Nov-20 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount ( |
20,372,790.00 |
19,157,656.00 |
111,071,723.00 |
Total Subscription ( |
57,297,849.00 |
54,805,160.00 |
333,834,247.00 |
Allotment ( |
5,849,034,000 |
19,157,656.00 |
111,071,723.00 |
Range of Bid Rates (%) |
0.0001 - 0.6500 |
0.0100 - 0.0900 |
0.300 - 25.000 |
Stop Rates (%) |
0.0215 |
0.09 |
0.15 |
Previous Stop Rates (%) |
0.04 |
0.15 |
0.30 |
Bid-to-Cover Ratio |
2.8x |
2.9x |
3.0x |
Allotment Ratio |
0.1x |
0.4x |
0.3x |
This week, we expect inflows from maturing OMO bills worth N418.9bn to hit system and further boost
system liquidity N295.5bn
(in the positive as at Friday). However, we do not anticipate an improvement in
demand as investors continue to seek alternatives from the current suppressed
NT-Bills secondary market yields. Thus, we maintain our advice that investors
remain on the lookout for possibly higher yielding instruments from
corporates.
Please see indicative secondary market NT-Bills rates
below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
11-Feb-21 |
73 |
1.15 |
1.15 |
29-Apr-21 |
150 |
1.85 |
1.86 |
10-Jun-21 |
192 |
2.20 |
2.23 |
26-Aug-21 |
269 |
2.40 |
2.44 |
16-Sep-21 |
290 |
2.79 |
2.85 |
Rates are valid till 01:45pm today
(30-Nov-2020)
*Please note that the minimum subscription
for T-Bills is N100, 000.00
FGN Bonds Update: Bullish
Sentiments Continues as Average Yield Contracts by 12bps WoW to 3.9%
The performance in the FGN bond secondary market last
week was bullish, as investors continue to seek alternatives from the
unimpressive yields in the NT-Bills market. As a result, average yield across
all tenors shed 12bps W-o-W to settle at 3.8% from 4.0% the previous week.
Particularly, the JAN-2022 and JUL-2030 maturities witnessed
the most buying interest, contracting -83bps and -55bps W-o-W respectively.
The Monetary Policy Committee ("MPC") held its
last meeting for the year to discuss monetary policy directions. The meeting
ended with a neutral outcome as the members of the committee voted unanimously
to maintain all policy parameters as the Monetary Policy Rate ("MPR")
was left at 11.5%.
Going into the week, The Debt Management
Office ("DMO") is scheduled to auction the 2- and 3-year tenor FGN
savings bond for the month of December 2020. Furthermore, we expect yields to
remain pressured as liquidity levels remain elevated. We therefore advice
investors to take position on the
relatively more attractive maturities along the curve while looking out for
possible corporate offerings.
Please see indicative secondary market bonds rates
below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Jan-26 |
6 |
2.90 |
12.50 |
145.54 |
Mar-27 |
7 |
3.00 |
16.29 |
175.72 |
Feb-28 |
8 |
3.10 |
13.98 |
169.96 |
Apr-29 |
9 |
3.20 |
14.55 |
183.05 |
Jul-34 |
14 |
4.20 |
12.15 |
181.85 |
Mar-36 |
16 |
4.23 |
12.40 |
191.33 |
Apr-37 |
17 |
4.60 |
16.25 |
233.02 |
Apr-49 |
29 |
6.19 |
14.80 |
214.46 |
Rates are valid till 01:45pm today
((30-Nov-2020)
*Please note that the minimum subscription
for Bonds is N20, 000,000.00
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