Strong Demand Witnessed at PMA; Average Yield in NT-Bills Market Sheds 5bps WoW

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Monday, June 01, 2020 / 01:33 PM / By Afrinvest Research / Header Image Credit: Novarik

 

Proshare Nigeria Pvt. Ltd.


Demand in the Nigerian Treasury Bills ("NT-Bills") secondary market was muted at the start of the 3-day trading session as investors anticipated the Primary Market Auction ("PMA"). However, activity level picked up at the end of the week as demand - due to lost bids at the Open Market Operation ("OMO") and primary market auctions - filtered into the market. As a result, average yield across all tenors dipped marginally by 5bps W-o-W to close at 2.1% on Friday.

 

Strong buying interests were witnessed across the short and medium-term bills, with yields on the 12-Nov-2020, 16-Jul-20 and the 2-Jul-20 maturities declining by 39bps, 38bps and 25bps respectively.


On Thursday, system liquidity improved to N627.3bn, buoyed by inflows from matured OMO instruments worth N303.2bn. Accordingly, the Apex bank offered a total of N160.0bn worth of OMO across the short, medium- and long-term maturities. With a bid-to-cover ratio of 2.2x (N355.0bn subscription vs. N160.0bn offer) , the Apex bank allotted a total of N114.0bn with stop rates on the 89-day, 194-day and 348-day instruments closing at 7.00%, 8.75% and 9.90% respectively, significantly lower than previous stop rates  at 11.50%, 11.54% and 12.71%.

 

At the PMA, the CBN rolled over a total of N59.4bn following a strong demand of N130.6bn. All tenors were oversubscribed with the most demand recorded on the 182-day tenor which had a 2.9x bid-to-cover ratio. Consequently, stop rates across the short- and medium-term instruments closed lower at 2.45% and 2.72% respectively while the long-term instrument closed higher at 4.02%.

 

Please see detailed PMA results below:

Auction Date

27-May-2020

27-May-2020

27-May-2020

Allotment / Issue Date

28-May-2020

28-May-2020

28-May-2020

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer Amount (N)

20,372,790,000

19,157,656,000

19,842,352,000

Total Subscription(N)

37,458,428,000

55,145,627,000

37,948,361,000

Allotment (N)

20,372,790,000

19,157,656,000

19,842,352,000

Range of Bid Rates (%):

2.2000 - 8.0000

2.4500 - 7.6931

3.5000 - 12.8000

Stop Rates (%):

2.4500

2.7200

4.0199

Previous Stop Rates (%):

2.5000

2.8500

3.8400

Bid-to-Cover Ratio:

1.8x

2.9x

1.9x

Allotment Ratio

0.5x

0.3x

0.5x


This week, we expect sustained buying interests in the secondary market due to the unfilled bids from last week's auction.


In addition to selecting attractive instruments across the NT-Bills secondary market, our recommendation is for investors to seek other attractive opportunities such as available Commercial Papers ("CP") offers. Qualified investors are advised to conduct all necessary due diligence on the issuers of these offerings.


Proshare Nigeria Pvt. Ltd.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

16-Jul-20

45

2.70

2.71

27-Aug-20

87

3.50

3.53

24-Sep-20

115

3.95

4.00

26-Nov-20

178

4.38

4.48

11-Feb-21

255

4.75

4.91

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

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

 

MTN Nigeria Communications Plc Commercial Paper

MTN Nigeria Communications Plc ("MTN Nigeria" or "the Company") is seeking to raise up to N50.0bn in Series 1 and Series 2 Commercial Paper issuance under its N100.0bn Commercial Paper ("CP") Programme in order to support its working capital and general corporate purposes.

 

Please see below the terms of the offer: 

Issuer

MTN Nigeria Communications Plc

Issuance size

up to N50 Billion

Description

 Series 1

Series 2

Tenor 

180-Day

270-Day

Effective Yield (%)

4.8000% - 5.0000%

5.8500% - 6.0000%

Discount Rate (%)

4.6890% - 4.8797%

5.6078% - 5.7455%

Issuer Rating

"Aa+" (Agusto); "AA" (GCR)

Method of Offer

Book Build

Subscription

Minimum of â‚¦1.0 million 

Tax Considerations

Free and clear of withholding taxes

Offer Open Date

Thursday, May 28 2020

Offer Close

Thursday, June 4 2020

Settlement Date

Friday, June 5 2020

Offer valid till 9:00am on (04-Jun-2020)

*Please note that the minimum subscription for this offer is N1,000,000.00

 

FGN Bonds Update: FGN Bond Market Sustains Bullish Trend as Average Yield Contracts 30bps W-o-W, MPC Cuts MPR to 12.5%

The FGN bonds secondary market started off on a relatively quiet note as investors traded cautiously while awaiting the decision of the Monetary Policy Committee ("MPC") meeting which held on Thursday. Nevertheless, overall performance in the market was bullish as buying interests were observed across all ends of the curve. Thus, average yield across all tenors shed 30bps W-o-W to close at 10.1% on Friday.


Across tenors, the short and mid-end of the curve witnessed the most demand, particularly the 23-Mar-25 (-115bps), 27-Apr-23 (-71bps) and the 26-Apr-29 (-49bps) maturities.

 

At the MPC meeting, the Committee surprisingly reduced the Monetary Policy Rate (MPR) by 100bps from 13.5% to 12.5% while holding other policy parameters constant. The MPC decision will have a marginal impact on yields due to the low interest rate environment as we perceive this as more of a signal to indicate an accommodative stance. Moreover, due to the ineffectiveness of the MPR and stickiness of the lending rates, we do not foresee any reduction in bank lending rates.

 

This week, we expect the bullish trend to continue as investors seek attractive yields in reaction to the MPC decision. We further advise investors with a longer-term perspective to take advantage of the 7-year Sukuk Bond offer at a rental rate of 11.2% which closes tomorrow, June 2, 2020.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

1

4.00

14.50

111.40

Jan-22

2

4.30

16.39

119.10

Apr-23

3

7.65

12.75

113.04

Mar-24

4

7.60

14.20

121.32

Mar-25

5

7.85

13.53

122.36

Jan-26

6

8.80

12.50

116.15

Mar-27

7

9.50

16.29

133.37

Feb-28

8

9.60

13.98

123.48

Jul-34

14

10.30

12.15

113.58

Mar-36

16

10.40

12.40

115.32

Apr-37

17

10.45

16.25

145.52

Apr-49

29

11.53

14.80

127.22

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

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


Proshare Nigeria Pvt. Ltd.

 

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