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Monday, March 09, 2020 / 12:43
PM / Afrinvest Research / Header Image Credit: MissyBanker
Last
week, performance in the Nigerian Treasury Bills ("NT-Bills") market was mixed
albeit slightly bullish as average yield across all tenors shed 1bp to close at
4.0% on Friday. The week started off on a bearish note as investors traded
cautiously amidst the COVID-19 breakout fears with sell offs witnessed on the
short and medium term maturities. However, activities picked up on Thursday
following improved system liquidity from matured OMO instruments. Medium-term
maturities particularly the 16-Jul-20 (+154bps) and 30-Jul-20
(+126bps) witnessed the most sell-offs while investors demand intensified on
the longer-end of the curve especially the 14-Jan-21 (-109bps) and 26-Nov-20
(-84bps) instruments.
OMO
maturities worth N232.3bn hit the system on Thursday and the Apex Bank
conducted an auction on the same day, offering a total of N100.0bn
across three tenors. While there was no sale on the short and medium term
instruments, the 362-day tenor was 1.4x oversubscribed (N80.0bn offer
vs. N112.1bn subscription). Consequently, the CBN sold a total of N110.5bn
with the marginal rate contracting by 1bp to 12.99%.
We
anticipate the release of the second quarter Nigerian T-Bills issue programme
by the Apex bank in the current week. A total of N86.3bn worth of
Treasury Bills is expected to mature on Thursday and we expect the CBN to roll
this over.
Please see indicative secondary market
NT-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
30-Apr-20 |
52 |
2.10 |
2.11 |
18-Jun-20 |
101 |
2.80 |
2.82 |
13-Aug-20 |
157 |
3.60 |
3.66 |
29-Oct-20 |
234 |
4.00 |
4.11 |
14-Jan-21 |
311 |
4.50 |
4.68 |
Rates are valid till 01:45pm today
(09-Mar-20)
*Please note that the minimum
subscription for NT-Bills is N100, 000.00
Going into the week,
we expect to see an improvement in system liquidity improves due to matured OMO
and T-Bills maturities (c. N141.0bn). However, the drastic drop in oil
prices to about $35.0 per barrel coupled with the second confirmed case of
COVID-19 in Nigeria will likely spook investors and cause further selloffs.
Thus, we advise investors to trade cautiously while taking advantage of
attractive opportunities along the yield curve, as well as expected CP offers.
FGN Bonds Market Update: Sell Pressures
Dominate Activity as COVID-19 Fears Mount; Average Yield Advances 103bps W-o-W
to 10.3%
Last week, performance
in the domestic bonds market was bearish following sell-offs particularly by
offshore investors on the back of the COVID-19 and weaker oil price fears. As a
result, average yield on all instruments appreciated, save for the short-term 15-Jul-21 (-37bps)
instrument which enjoyed buying interests. By Friday, average yield across all
tenors inched 103bps higher to close at 10.3%.
Although the 23-Mar-25, 14-Mar-24 and 27-Apr-24 instruments enjoyed the
most buying interest two weeks ago, these instruments witnessed the most sell
offs in last week’s trading session with yields rising by 324bps, 267bps and
178bps respectively.
This week, we expect to
see bargain hunting activities particularly on attractive short term bonds with
3-5 years TTM on the back of the sell-offs witnessed last week. Investors are
advised to trade cautiously and cherry pick bonds with attractive yields and
lower prices.
Please see indicative secondary market
bond rates below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Jul-21 |
2 |
5.90 |
14.50 |
111.00 |
Jan-22 |
3 |
5.90 |
16.39 |
118.44 |
Apr-23 |
4 |
8.90 |
12.75 |
110.30 |
Mar-24 |
5 |
9.40 |
14.20 |
115.75 |
Mar-25 |
6 |
7.40 |
13.53 |
125.39 |
Jan-26 |
7 |
9.80 |
12.50 |
111.81 |
Mar-27 |
8 |
10.20 |
16.29 |
130.00 |
Feb-28 |
9 |
10.50 |
13.98 |
118.45 |
Jul-34 |
15 |
10.50 |
12.15 |
112.06 |
Mar-36 |
17 |
10.50 |
12.40 |
114.58 |
Apr-37 |
18 |
10.30 |
16.25 |
147.37 |
Apr-49 |
30 |
11.90 |
14.80 |
123.49 |
Rates are valid till 01:45pm today
(09-Mar-20)
*Please note that the minimum
subscription for FGN Bonds is N20,000,000.00
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