PMA Holds on Wednesday; Yields Advanced 18bps WoW to Settle at 5.38% as Market Turns Bearish

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Monday October 25, 2021 / 03:42 PM / by Afrinvest Research / Header Image Credit: iStock


The Nigerian Treasury Bills ("NT-Bills") secondary market reversed its bullish run last week, as investors took advantage of price appreciations in the proceeding weeks. Consequently, yields in the market gained 18bps W-o-W on average to close at 5.38% (from 5.20% the previous week).


In more detail, mid-tenor bills saw the most sell-offs, as average yield gained 32bps W-o-W, with the 28-Apr-22 (+106bps) and 12-May22 (+83bps) bills advancing the most W-o-W respectively. However, the average yield at the long end of the curve shed 6bps to close at 6.50% (from 6.56% the proceeding week).

This week, the Apex bank is scheduled to roll over maturing bills worth N150.0bn at the NT-Bills Primary Market Auction ("PMA") on Wednesday (27-Oct-21) across the 91-, 182-, and 364-Day tenors.


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Please see a detailed summary in the table below:

Auction Date

27-Oct-21

27-Oct-21

27-Oct-21

Allotment Date

28-Oct-21

28-Oct-21

28-Oct-21

Tenor

91-DAY

182-DAY

364-DAY

Offer Amount

3,174,989

6,000,000

140,870,200

Last Stop Rate - 13-Oct-21 (%)

2.50%

3.50%

7.25%

Expected Stop Rate Range (%)

2.00% - 3.00%

3.00% - 3.75%

6.80% - 7.50%


Going into the week, we expect quiet trading sessions before the PMA (as investors position for the auction) despite the N91.0bn and N150.1bn worth of maturing OMO bills and NT-Bills respectively scheduled to hit the system and improve system liquidity (approx. N261.0bn short as at Friday). Therefore, we advise retail investors to remain cautious, while taking positions 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.

10-Feb-22

108

2.90

2.93

31-Mar-22

157

4.23

4.31

26-May-22

213

5.05

5.20

14-Jul-22

262

5.90

6.16

25-Aug-22

304

6.76

7.16

9-Sep-22

319

7.06

7.52


Rates are valid till 01:45 pm today [25-Oct-21]

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


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FGN Bond Update: Mixed Sentiments as Average Yield Gains 6bps Marginally to Settle at 11.38%


Last week, the bonds secondary market resumed on a quiet note as investors were on the sidelines ahead of the auction that took place on Wednesday. As the week progressed, activity levels improved as average yield in the market inched higher by 6bps W-o-W to close at 11.38% (from 11.33% the week before) driven by sell-offs.


Specifically, the average yield on short- and medium-tenor instruments rose 13bps and 10bps W-o-W to close at 8.64% and 8.51% respectively, while the average yield at the long-end of the curve lost 4bps with the highest buying interest recorded on the 26-Apr-49 (-34bps) and 24-Jul-45 (-23bps) maturities.


At the bond PMA, the Debt Management Office ("DMO") offered a total of N150.0bn which was met with mixed demand as the JAN-26 bond was undersubscribed while the APR-37 and MAR-50 instruments were oversubscribed.

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

 

12.50% FGN JAN 2026

16.2499% FGN APR 2037

12.98% FGN MAR 2050

Auction Date

20-Oct-21

20-Oct-21

20-Oct-21

Settlement Date

22-Oct-21

22-Oct-21

22-Oct-21

Maturity Date

22-Jan-26

18-Apr-37

27-Mar-50

Tenors

10-Years

20-Years

30-Years

Term-to-Maturity

4 Years, 3 Months

15 Years, 6 Months

28 Years, 5 Months

Amount Offered (N'bn)

50.00

50.00

50.00

Total Bids

44

96

79

Successful Bids

36

61

54

Subscription (N'bn)

49.05

80.92

120.74

Amount Allotted (N'bn)

44.80

52.72

92.24

Rang of Bids (%)

10.50 -13.00

12.00 - 14.00

12.70 - 13.99

Marginal Rates (%)

11.65

12.95

13.20

Bid-to-Cover Ratio

1.1x

1.5x

1.3x

Allotment Ratio

0.9x

1.1x

1.8x

 
This week we expect more traction in the secondary market as investors adjust their portfolios with increasing yields in the market. In that light, we advise investors to position in attractive maturities across all tenors in the market.


Please see below FGN Bonds secondary market indicative rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

7.80

12.75

106.90

Mar-24

3

8.60

14.20

111.83

Mar-25

4

9.55

13.53

111.34

Jan-26

5

10.55

12.50

106.49

Mar-27

6

10.90

16.29

121.52

Feb-28

7

11.35

13.98

111.60

Jul-34

13

11.50

12.15

104.24

Mar-36

15

12.00

12.40

102.68

Apr-37

16

12.10

16.25

128.72

Apr-49

28

12.05

14.80

121.91

Rates are valid till 01:45 pm today [25-Oct-21]
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


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