PMA Holds on Wednesday; Yield Contracts 14bps WoW to Settle at 4.48% as Bullish Run Continues

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Monday, September 13, 2021 / 02:59 PM / by Afrinvest Research / Header Image Credit: iStock


The bullish run in the Nigerian Treasury Bills ("NT-Bills") secondary market persisted last week, on the back of sustained positive liquidity levels (averaging
N60.7bn for the week) as N119.1bn and N138.2bn worth of Open Market Operation ("OMO") bills and NT-Bills maturities respectively hit the system during the course of the trading week.

Consequently, the average yield across all maturities shed 14bps W-o-W (from 4.71% the previous week to close at 4.58%). Precisely, most buying interests were recorded at the long end of the curve as the average yield dipped 61bps to close at 5.58% from 6.20% the preceding week. The most demands were seen on the 12-May-22, 26-May-22, and 28-Apr-22 bills as their yields fell 109bps, 90bps, and 88bps W-o-W respectively.


At the NT-Bills Primary Market Auction ("PMA") last week, the central bank rolled over the matured
₦138.2bn across the 91-, 182-, and 364-Day bills which are met with strong demand. Particularly, the 364-Day instrument enjoyed the most demand with a subscription ratio of 2.2x while the trend on declining stop rate was reversed, closing 40bps higher at 7.20% (from 6.80% in the previous auction).


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Please see more details of the PMA below:

Auction Date

8-Sep-21

8-Sep-21

8-Sep-21

Allotment Date

9-Sep-21

9-Sep-21

9-Sep-21

Maturity Date

9-Dec-21

10-Mar-22

8-Sep-22

Tenor

91-Day

182-Day

364-Day

Offer (₦)

5,060,519,000

23,454,545,000

109,651,700,000

Subscription (₦)

5,846,371,000

12,740,004,000

237,538,249,000

Allotment (₦)

4,938,371,000

11,883,004,000

192,682,149,000

Range of Bids (%):

2.49000 - 6.0000

3.4900 - 6.5000

6.2000 - 9.2000

Previous stop rates (%):

2.50

3.50

6.80

Current Stop Rates (%):

2.50

3.50

7.20

Bid-to-Cover Ratio

1.2x

1.1x

1.2x


Going into this week, we believe market participants would stay on the side-lines, as the anticipated rollover of N
38.0bn and N155.9bn worth of OMO and NT-Bills maturities respectively would give more guidance on yield levels in upcoming auctions in the near term. Accordingly, we expect a flat performance with a mildly bullish bias due to likely positive financial liquidity levels.

Please see our expectation of the PMA slated for this Wednesday (15-Sep-21):

Auction Date

15-Sep-21

15-Sep-21

15-Sep-21

Allotment Date

16-Sep-21

16-Sep-21

16-Sep-21

Tenor

91-DAY

182-DAY

364-DAY

Offer Amount

1,605,535

5,913,188

148,361,351

Last Stop Rate (08-Sep-21) (%):

2.50%

3.50%

7.20%

Expected Stop Rate Range (%):

2.00% - 3.00%

3.00% - 3.75%

6.80% - 7.50%


Therefore, we advise retail investors to remain cautious, while taking position in attractive instruments during the week, as well as primary market offerings.
 

Please see NT-Bills indicative rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

13-Jan-22

122

3.70

3.75

10-Feb-22

150

4.35

4.43

31-Mar-22

199

4.80

4.93

26-May-22

255

6.40

6.70

30-Jun-22

290

6.84

7.23

14-Jul-22

304

7.06

7.50

Rates are valid till 01:45 pm today [13-Sep-21]
*Please note that the minimum subscription for NT-Bills is N
100,000.00


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FGN Bonds Update: Average Yield inch 5bps higher WoW to 11.04%


At the FGN bonds secondary market, performance was mixed as investors adjust their portfolios with suitable instruments across the curve. Subsequently, the average yield across the market slightly advanced 5bps to close at 11.09% from 11.04% the week before.

In more detail, sell-offs were recorded at the long end of the curve as the average yield gained 18bps W-o-W to close at 12.48%. While the short- and mid-term bonds witnessed some buying interests as yields in both segments shed 3bps W-o-W apiece.

This week, the National Bureau of Statistics ("NBS") is slated to release the CPI and Inflation report for August. So, we believe trading activities in the bonds space will be influenced by the data, as well as the expected NTB and OMO auctions this week. Thus, we advise investors to trade cautiously and position in maturities that have recorded improved yields along the curve.

Please see below FGN Bonds secondary market indicative rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

8.10

12.75

106.90

Mar-24

3

8.20

14.20

113.31

Mar-25

4

9.40

13.53

112.14

Jan-26

5

9.70

12.50

109.73

Mar-27

6

10.30

16.29

124.70

Feb-28

7

10.70

13.98

114.97

Jul-34

13

11.40

12.15

104.95

Mar-36

15

11.85

12.40

103.76

Apr-37

16

11.50

16.25

134.05

Apr-49

28

11.80

14.80

124.31

Rates are valid till 01:45 pm today [13-Sep-21]
*Please note that the minimum subscription for FGN Bonds is N
20,000,000.00


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