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The Bulls Opened the Year's Performance as Average Yield Declines 1bp WoW to 4.39%

Bonds & Fixed Income	691 VIEWS
Bonds & Fixed Income
691 VIEWS

Monday, January 10, 2022 / 2:10 PM / by Afrinvest Research / Header Image Credit: iStock

In the first trading week of the year, the Nigerian Treasury Bills ("NT-Bills") secondary market was slightly bullish as investors continue to react to declining rates at the primary market. The week started on a quiet note and maintained minimal trading activities despite buoyant system liquidity (N159.2bn long as at Friday). Consequently, average yield dipped marginally by 1bp W-o-W to settle at 4.39% from 4.40% the previous week.

In more detail, average yields on the short- and medium-term instruments traded flat throughout the week, while the long-dated instruments witnessed the most demand, contracting 8bps W-o-W, with the 25-Aug-2022 (-98bps) bill enjoying the most buying interest.

On Wednesday (12-Jan-22), the Apex bank is scheduled to roll over maturing bills worth N77.6bn at the NT-Bills Primary Market Auction ("PMA") across the 91-, 182-, and 364-Day tenors.

Please see below our PMA expectations:

Auction Date	12-Jan-22	12-Jan-22	12-Jan-22
Allotment Date	13-Jan-22	13-Jan-22	13-Jan-22
Tenor	91-Day	182-Day	364-Day
Offer Amount (N)	4,220,558.00	7,459,979.00	65,931,722.00
Last Stop Rate (%)	2.49%	3.45%	4.90%
Expected Stop Rate Range (%)	2.00% - 2.50%	3.00% - 3.50%	4.00% - 5.00%

Going into the week, we expect sustained tepid sentiments at the beginning of the week as investors anticipate Wednesday's PMA. In addition, system liquidity is expected to be bolstered by Open Market Operations ("OMO") and NT-Bills maturities worth N70.0bn and N77.6bn. Thus, we advise investors to trade cautiously prior to the outcome of the PMA.

Please see indicative secondary market NT-Bills rates below:

Maturity	Tenor (Days)	Rate (%) p.a.	Yield (%) p.a.
10-Mar-22	59	2.90	2.91
26-May-22	136	4.85	4.94
9-Jun-22	150	5.15	5.26
14-Jul-22	185	5.90	6.08
25-Aug-22	227	6.75	7.05
9-Sep-22	242	7.00	7.34

Rates are valid till 01:45 pm today [10-Jan-22]

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

FGN Bonds Update: Average Yield Expands Marginally by 4bps W-o-W to 11.59%

The domestic bonds secondary market recorded a mixed performance last week, with minimal volume of trades executed across the curve. Accordingly, average yield expanded 4bps to close at 11.59% from 11.55% the previous week.

Major selloffs were witnessed on the short and long term instruments, specifically the Apr-2049 (+40bps), Apr-2023 (+20bps) and Jan-2022 (+20bps) maturities yields expanded +12bps and +5bps W-o-W respectively. Conversely, the mid-dated instruments enjoyed the most buying interest (-2bps) as yields on the Feb-2028 maturity contracted 11bps.

Please see below FGN bonds secondary market rates:

Bond	Tenor (Years)	Yield (%)	Coupon (%)	Implied Price (N)
Apr-23	2	7.50	12.75	106.34
Mar-24	3	8.20	14.20	111.71
Mar-25	4	9.35	13.53	111.30
Jan-26	5	10.45	12.50	106.59
Mar-27	6	10.90	16.29	120.87
Feb-28	7	11.20	13.98	112.04
Apr-29	8	10.60	14.55	119.67
Jul-34	9	11.30	12.15	104.10
Mar-36	14	11.85	12.40	103.54
Apr-37	16	11.95	16.25	128.99
Apr-49	28	11.80	14.80	120.96
Mar-50	29	12.15	12.98	106.51