PMA Holds on Wednesday; Average NT-Bills Yield Close Marginally Up 9bps WoW

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Tuesday, April 14, 2020 /03:32 PM / by Afrinvest Research / Header Image Credit: LegitNG

 

There was a slowdown in the Nigerian Treasury Bills ("NT-Bills") secondary market activities in the 4 trading sessions last week, with local investors more on the sidelines but mostly taking interest in long-term instruments and higher yielding corporate offers. Thus, average yield across all tenors closed flat with a slightly bearish bias up 9bps W-o-W due to sell-offs by some investors to take advantage of the relatively better offers.


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Precisely, average yield the mid-term bills gained 0.6% W-o-W while at the long end of the curve, yields shed 0.3% W-o-W on slight demand. The short-term bills however closed flat due to only trickles of trades at this end by retail clients. In more detail, the most declining bills were 11-Feb-2020 (-1.3%) and 28-Jan-2020 (-0.6%) while yields on 01-Oct-2020 (+1.6%) and 17-Sep-2020 (+1.2%) advanced the most.

 

In the Open Market Operations ("OMO") space, the Apex bank conducted its usual OMO auction, successfully mopping up N39.4bn of the financial system liquidity (N507.0bn long, as at last Thursday) with stop rates remaining unchanged (12.79%) as investor demand continued to wane with no interest on short and medium term offerings.

 

Going into the week, N195.0bn matured OMO bills and N58.5bn matured NT-Bills are scheduled to hit the system further buoying liquidity levels. The CBN is however slated to rollover the matured NT-Bills at a Primary Market Auction ("PMA") on Wednesday.

 

Please see below our expectations in the table below:

Auction Date

15-Apr-20

15-Apr-20

15-Apr-20

Allotment / Issue Date

16-Apr-20

16-Apr-20

16-Apr-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

5,849,034,000

3,500,000,000

49,141,302,000

Previous Stop Rates (%)

2.2000

3.2000

4.3000

Expected Stop Rates Range (%)

2.20 - 2.49

3.00 -3.50

3.99 - 4.30

 

Our advice is for local qualified investors to take advantage of available corporate offerings - Dangote Cement bond with effective yield range of 12.25% -12.50% and available Commercial Paper offerings expected during the week. On NT-Bills, mid-term bills that advanced last week can be cherry-picked by local investors.


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Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

18-Jun-20

65

2.20

2.21

13-Aug-20

121

3.20

3.23

24-Sep-20

163

3.50

3.56

26-Nov-20

226

3.90

4.00

14-Jan-21

275

4.10

4.23

11-Feb-21

303

4.30

4.46

Rates are valid till 01:45pm today (14-Apr-2020)

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

 

FGN Bond Update: OPEC+ Agrees on Oil Production Cuts; Bullish Run Sustained as Average Yield Declines 46bps W-o-W

At the start of last week, positive expectations ahead of the OPEC+ meeting on possible oil production cut drove bullish sentiment across markets.

 

As more demand filtered into the FGN bond space, mostly from local investors, average yield across all tenors dipped 0.5% W-o-W to settle at 11.3%, sustaining the bullish run from the previous week. The short-term bonds declined the most, 0.8% W-o-W followed by the medium- and long-term bonds both dipping 0.4% and 0.3% W-o-W respectively.

 

Most buying interest was witnessed on 14-Mar-24 (-1.8%), 27-Apr-23 (-1.4%) and 23-Mar-25 (-1.1%)

 

However, despite the OPEC+'s agreement to cut oil production to 9.7mbpd, Brent the global benchmark still witnessed marginal decline at $31.45 as at the time of this report.


Thus, we expect reduced buying interests and a slowdown in activities by local bond players, as most investors are also cautious ahead of expected inflation data this week. We therefore advise investors to consider attractive corporate offers e.g. Dangote Cement bond, Axxela Bond and trade cautiously in the FGN bond space.

 

Please see indicative secondary market bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

2

4.80

14.50

111.79

Jan-22

3

5.20

16.39

119.00

Apr-23

4

8.60

12.75

110.92

Mar-24

5

8.40

14.20

119.07

Mar-25

6

10.50

13.53

111.47

Jan-26

7

10.70

12.50

107.58

Mar-27

8

11.54

16.29

122.23

Feb-28

9

11.15

13.98

114.55

Jul-34

15

11.60

12.15

103.75

Mar-36

17

11.20

12.40

108.81

Apr-37

18

11.30

16.25

137.05

Apr-49

30

11.60

14.80

126.52

Rates are valid till 01:45pm today (14-Apr-2020)

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

 

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