Bearish Performance as Average Yield Marginally Advance 4bps WoW to 5.61%

Proshare

Monday, September 27, 2021 / 02:52 PM / by Afrinvest Research / Header Image Credit: iStock


Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market sustained its bearish trend amidst pressured liquidity levels (which fell to N211.01bn short on Friday). Sell-offs were witnessed on short- and medium-term bills at the early trading sessions of the week. However, buying interest was recorded on the long-dated maturities (as average yield contracted 10bps W-o-W) to close at 6.59%. Consequently, the average yield across all NTB instruments inched 4bps W-o-W to close at 5.61%.

Proshare Nigeria Pvt. Ltd.


This week, a total of N111.87bn worth of maturing NT-Bills will be rolled over by the Apex Bank in a Primary Market Auction ("PMA") on Wednesday, 30-Sep-21, across the 91-, 182- and 364-Day tenors.

Please see our expectations of the PMA below:

Auction Date

30-Sep-21

30-Sep-21

30-Sep-21

Allotment Date

01-Oct-21

01-Oct-21

01-Oct-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Value on Offer (₦)

2,263,036.00

3,240,389.00

106,370,499.00

Previous Stop Rates (%)

2.50

3.50

7.20

Expected Stop Rate Range (%)

1.80 - 2.50

2.90 - 3.50

7.50 - 8.50


We anticipate improved activity levels in the NT-Bills secondary market this week, given the expected buoyant liquidity levels from maturing instruments (NT-Bills: N111.87bn, OMO bills: N107.39bn) in the financial system. Thus, we advise investors to continue to position in relatively attractive bills across the curve while also looking out for possible corporate offerings.
 

Please see NT-Bills indicative rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

13-Jan-22

111

3.55

3.59

31-Mar-22

188

4.80

4.92

28-Apr-22

216

5.15

5.31

26-May-22

244

6.10

6.36

09-Jun-22

258

6.40

6.70

30-Jun-22

279

6.84

7.22

14-Jul-22

293

7.04

7.46

Rates are valid till 01:45 pm today [27-Sep-21]
*Please note that the minimum subscription for NT-Bills is N100,000.00

Proshare Nigeria Pvt. Ltd.


 FGN Bonds Update: Bearish Performance Reversed as Average Yield Sheds 7bps WoW to 11.23%

The FGN bonds secondary market performance turned bullish, as funds were channeled from unmet bids at the PMA. As a result, average yield across all maturities dipped 7bps W-o-W to settle at 11.23% (from 11.31% the previous week), with the most buying interests recorded on the 17-Mar-27 (-68bps W-o-W) and 22-Jan-26 (-41bps W-o-W) maturities.

At the PMA, the Debt Management Office's ("DMO") total offer of N150.0bn which was met with strong demand, recording an overall subscription of 2.2x. In addition, the highest subscription at the auction was recorded on the 2050s which had N156.3bn subscription. Furthermore, the DMO maintained the previous stop rate for the 2028s and 2036s, while the 2050s was improved to 13.00% (+20bps).

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

 

13.98% FGN FEB 2028 (Re-opening)

12.40% FGN MAR 2036 (Re-opening)

12.98% FGN MAR 2050 (Re-opening)

Term-To-Maturity

6 Years, 5 Months

14 Years, 6 Months

28 Years, 6 Months

Amount Offered (N)

50,000,000,000.00

50,000,000,000.00

50,000,000,000.00

Total Subscription (N)

52,433,103,000.00

125,580,002,000.00

156,309,353,000.00

Amount Allocated (N)

42,373,103,000.00

115,854,702,000.00

118,826,853,000.00

Bid to Cover Ratio

1.24x

1.08x

1.32x

Subscription Ratio

1.05x

2.51x

3.13x

Stop Yield (%)

11.60%

12.75%

13.00%

Previous Auction Stop Yield (July 2021)

11.60%

12.75%

12.80%

Difference between Current and previous Stop Yields

-

-

20bps


Going into the week, we expect more buying interests, as investors anticipate lower yields on the back of reduced supply from the DMO in the near term, given the FGN’s Eurobond auction held last week. We therefore advise investors to take advantage of maturities with improved yields across the curve.

Please see below FGN Bonds secondary market indicative rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

             7.80

            12.75

                  107.26

Mar-24

3

             8.30

            14.20

                  112.95

Mar-25

4

             9.55

            13.53

                  111.61

Jan-26

5

             9.75

            12.50

                  109.49

Mar-27

6

           10.70

            16.29

                  122.73

Feb-28

7

           10.80

            13.98

                  114.42

Jul-34

13

           11.50

            12.15

                  104.26

Mar-36

15

           11.95

            12.40

                  103.06

Apr-37

16

           11.50

            16.25

                  134.03

Apr-49

28

           11.80

            14.80

                  124.32

Rates are valid till 01:45 pm today [27-Sep-21]
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


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