Bonds & Fixed Income | |
Bonds & Fixed Income | |
2313 VIEWS | |
![]() |
Monday,
June 24, 2019 / 11:59AM / By Afrinvest Research
The
bullish run recorded at the Treasury Bills (“T-Bills”) secondary market
was sustained for a second consecutive week following sustained robust system
liquidity (N207.3bn positive as at Monday). This was further supported
by the absence of Open Market Operations (“OMO”) offer by the Central
Bank of Nigeria (“CBN”) all through the week.
In line with the overall bullish sentiment, yields compressed further, albeit marginally by 3bps W-o-W to settle at 12.39% from 12.42% the previous week. Buying interests were witnessed at the shorter end of the curve particularly the 22-Aug-19 (-107bps) instrument.
However,
ahead of the Primary Market Auction (“PMA”) on Wednesday, slight
selloffs were recorded on the longer end of the curve - especially the 30-Apr-20
(+62bps) - as some investors exited positions in anticipation of the PMA
which surprisingly held for a second consecutive week (a departure from the
CBN’s customary bi-monthly auction schedule). The Apex Bank’s total offering of
N17.6bn at the PMA was met with strong demand following its total
subscription of N132.9bn (bid-to-cover ratio of 7.6x).
This
strong demand was enjoyed across all tenors with the majority on the 364-day
instrument recording a bid-to-cover ratio of 11.0x (N10.6bn offered vs. N117.2bn
subscribed). Consequently, stop rates across all tenors moderated to 9.60%,
11.89% and 12.02% respectively.
Furthermore,
the CBN maintained amount offered across the short, medium and
long-tenors despite the significant demand which informed the buying interests
that filtered into the secondary market throughout the rest of the week
as investors sought to fill their lost bids in the secondary market in the
absence of an OMO auction.
Please
see below results of the PMA:
Auction
Date |
19-Jun-19 |
19-Jun-19 |
19-Jun-19 |
Allotment
/ Issue Date |
20-Jun-19 |
20-Jun-19 |
20-Jun-19 |
Tenor |
(91-Day) |
(182-Day) |
(364-Day) |
Offer
Amount ( |
3,000,000,000 |
4,000,000,000 |
10,614,105,000 |
Total
Subscription ( |
3,270,000,000 |
12,528,101,000 |
117,197,858,000 |
Allotment ( |
3,000,000,000 |
4,000,000,000 |
10,614,105,000 |
Range of Bid Rates
(%): |
9.60 – 13.00 |
11.30 – 12.50 |
11.75 – 12.69 |
Stop
Rates (%): |
9.60 |
11.89 |
12.02 |
Previous Stop Rates
(%): |
10.00 |
11.95 |
12.20 |
Allotment Ratio: |
0.9x |
0.3x |
0.1x |
Bid-to-cover ratio |
1.1x |
3.1x |
11.0x |
In
the absence of CBN’s OMO auctions, we expect to see sustained buying interests
in the secondary market this week especially at the short- and medium-term
bills on the back of buoyant system liquidity (N479.5bn long as at
Friday) along with the N17.1bn worth of maturing OMO bills scheduled to
hit the financial system. Thus, we advise investors to take advantage of the
attractive yields on the long-term maturities and possible OMO offerings as we
expect the CBN to resume its customary interventions.
Please see indicative secondary market
T-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
5-Sep-19 |
73 |
9.00 |
9.16 |
3-Oct-19 |
101 |
10.50 |
10.81 |
7-Nov-19 |
136 |
10.60 |
11.04 |
5-Dec-19 |
164 |
10.80 |
11.35 |
16-Jan-20 |
206 |
11.25 |
12.01 |
20-Feb-20 |
241 |
11.40 |
12.33 |
OMO Auction |
c.100 |
10.00 |
10.28 |
OMO Auction |
c.200 |
11.00 |
11.71 |
OMO Auction |
c.350 |
11.70 |
13.18 |
Rates are valid till 01:45pm today (24-Jun-19)
*Please note that the minimum subscription for T-Bills is N100,000.00
How do
I fund my account?
Kindly fund your Afrinvest in-house account
“instantly” right from your online banking platform through NIBBS E-Bills (Read FAQs). The banks currently enabled are GT Bank, First Bank, Stanbic IBTC,
Wema Bank and Zenith Bank
For GT Bank users, please note that you can fund your
account through your GT Bank Mobile Banking app or using the short-code below:
*737* 35 *amount*9054# (for example *737* 35 *25000* 9054#)
NOTE: Payment should ONLY be made to Afrinvest
Securities Limited Client bank accounts
Buying
Interests Persist into Second Consecutive Week as Average Yield Tighten by 11bps
W-o-W
Last
week, the bonds market sustained its bullish run into a second consecutive week
as investors switched focus from the short-dated to long-dated. As a result,
average yields dipped by 11bps to 13.7% from13.8% the prior week. In
addition, the 12-Dec-21 (-52bps), 16-Jan-22 (-52bps) and 27-Jan-22
(-64bps) maturities enjoyed the most buying interests.
Going
into the week, we expect that this bullish trend will be tapered within the
secondary market as we anticipate that both local and offshore players will
participate at the upcoming Bond Auction slated for Wednesday where the Debt
Management Office (“DMO”) is expected to offer a total of N100.0bn
across the 5-, 10- and 30-year maturities.
Please
see below details of the Bond Auction:
BOND |
12.75% FGN APR 2023 |
14.55% FGN APR 2029 |
14.8% FGN APR 2049 |
(Re-opening) |
(Re-opening) |
(Re-opening) |
|
Term-To-Maturity |
3 Years, 10 months |
9 Years, 10 months |
29 Years, 10 months |
Amount on Offer |
|
|
|
Original Tenor |
5-Year |
10-Year |
30-Year |
We
therefore advise investors to take advantage of the attractive yields on the
short-dated maturities.
Please see indicative FGN bond rates below:
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
|
Jul-21 |
2 |
14.00 |
14.50 |
100.84 |
Jan-22 |
3 |
13.95 |
16.39 |
105.12 |
Apr-23 |
4 |
14.28 |
12.75 |
95.55 |
Mar-24 |
5 |
14.10 |
14.20 |
100.28 |
Mar-25 |
6 |
14.29 |
13.53 |
97.03 |
Jan-26 |
7 |
14.55 |
12.50 |
91.47 |
Mar-27 |
8 |
14.40 |
16.29 |
108.57 |
Feb-28 |
9 |
14.46 |
13.98 |
97.62 |
Jul-34 |
15 |
14.50 |
12.15 |
85.73 |
Mar-36 |
17 |
14.55 |
12.40 |
86.58 |
Apr-37 |
18 |
14.50 |
16.25 |
111.01 |
Rates
are valid till 01:45pm today (24-Jun-19)
*Please
note that the minimum subscription for Bonds is N20,000,000.00
Related News
1. Invest in FGN
Monthly Bond Auction – June 2019
2. DMO Clarifies
Media Reports on Eurobond Issuance by Nigeria in 2019
3. Nigerian
Eurobonds Maintain Strong Rally as Global Central Banks Turn Dovish
4. Lafarge Africa
Plc Redeemed Its N26.4 Billion Series 1 Bond Due On June 15, 2019
5. Nigerian
Eurobonds Surge on Trump-Xi’s Planned Meeting at G-20 Summit
6. Treasury Bills
Market Sustain Bull Run As CBN Holds Off On OMO
7. DMO Lists FRN
Dual-Tranche $2.5bn and Triple Tranche $2.86bn Eurobond on FMDQ OTC
8. A Quiet Trading
Session as Primary Market T-Bills Auction Takes Centre Stage
9. Market Interest
Rates Edge Upwards
10. June 2019 FGN
Savings Bonds Offer for Subscription
11. Average Money
Market Rate Rose By 6.61% To Settle At 11.15% Due To Constraint In System
Liquidity
12. Ecobank Hosted
by London Stock Exchange After Successful $500m Eurobond Issuance
13. Dangote Cement
Plc Series 8, 9 and 10 Commercial Paper To Open Soon
14. Why Nigeria
Needs To Utilize The Green Bonds Market - Olumide Lala
15. Treasury Bills
Yields Expand Across the Curve as Market Adjusted to Anticipated Supply
16. Federal
Government of Nigeria Issues N15 billion Series II Green Bond
17. Average Money
Market Rate Decreased By 7.04% To Settle At 4.54% Due To Buoyant System
Liquidity
18. Stanbic IBTC
Bank Plc Series 48, 49 and 50 Commercial Paper To Open On May 31, 2019
19. CBN’s Wholesale
FX Auction Pressures Money Market Rates Higher
20. Bullish Run
Subsides as CBN Resumes OMO Auction; Average Yields Close at 12.2%