Bullish Sentiment Resurfaces as Average Yield Retreat to 14.2%

Proshare

Monday, February 25, 2019  01:19 PM / Afrinvest Research

 

The Treasury Bills (“T-Bills”) secondary market last week traded on bullish sentiments as investors’ anticipation of OMO auctions fell flat as the Central Bank held-off in a bid to ease pressure on system illiquidity. As a result, average yield across tenors declined 0.6% W-o-W to 14.2% from 14.9%, particularly the April 2019 bills such as 04-Apr-19 (-4.3% W-o-W) and 18-Apr-19 (-5.1% W-o-W). 

The Apex bank conducted only two Open Market Operations (“OMO”) auctions during the week to investors’ dismay. At the first auction which held on Monday, the Central Bank issued a no-sale result despite the 325.9% oversubscription to its total offer of N30.0bn (vs N127.8bn subscription) across the 101-, 178-, and 353-day tenors. 

This was to ease system liquidity on Monday (short N518.4bn). Interestingly, at the second intervention on Thursday, the CBN prorated its allotment – for the first time in months – on its long-term offer of N400.0bn with an allotment ratio of 0.8x due to the significant demand (bid-to-cover ratio of 1.8x) while the short and medium-term offers of N50.0bn and N100.0bn witnessed moderate demand, resulting in a bid-to-cover ratio of 0.2x and 0.5x respectively. 

This week, a Primary Market Auction (“PMA”) is slated to hold on Wednesday where the CBN is expected to rollover a total of N115.1bn across the 91- (N23.4bn), 182- (N38.8bn) and 364-day (N59.9bn) tenors. Please see below our PMA expectations:

 

TENOR

91-DAY

182-DAY

364-DAY

Offer Amount (N)

24,372,790,000

38,751,846,000

51,995,029,000

Last Stop Rate (%)

10.97%

13.40%

14.95%

Expected Stop Rate Range (%)

10.90%-11.00%

13.30%-13.50%

14.80%-15.00%

 

Furthermore, we envisage that this bullish trend in the secondary market will persist into this week following the reduction in the frequency of OMO auction offers as we expect the CBN bank to ease up on its tight stance on liquidity (N609.9bn in the negative as at Thursday) despite the T-Bills and OMO maturities worth N464.8bn scheduled to hit the financial system. Thus, we advise investors with long-term interests to take advantage of the attractive rates in the Primary Market.

 

Please see indicative T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

02-May-19

66

9.00

9.15

09-May-19

73

9.50

9.68

15-Aug-19

171

11.75

12.43

31-Oct-19

248

13.50

14.86

09-Jan-20

318

14.00

15.94

13-Feb-20

353

14.00

16.19

OMO Auction

c.100

10.70

11.03

OMO Auction

c.200

12.50

13.55

OMO Auction

c.350

14.20

16.45

Rates are valid till 01:45pm today (25-Feb-2019)
*Please note that the minimum subscription for T-Bills is N100,000.00
 
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 Guaranty Trust Bank, Ecobank, First Bank, Diamond Bank, Stanbic IBTC, Wema Bank and Zenith Bank

For GT Bank users, please note that you can fund your account using the USSD code below:
*737* 35 *Amount* 9054 # (for example *737* 35 *1000000* 9054#)

NOTE: Payment should ONLY be made to Afrinvest Securities Limited Client bank accounts

 

Access Bank Green Bond Issue

Access Bank (“Access”) is issuing a 5-year Fixed Rate Senior Unsecured Green Bond Issuance of up to N15.0bn which is the first ever Climate Bonds Standard Certified Corporate Green Bond issued in Africa. 

The net proceeds from the Issue will be applied towards financing/ re-financing identified eligible green assets and projects, duly verified and certified by Climate Bonds initiative (CBi), in line with the global Climate Bonds Standard. Please see details below:

Issuer

Access

Issue Size

Up to 15.0bn

Bond Description

5 Year [•] % Fixed Rate Senior Unsecured Green Bonds due 2024

Status of the Notes

Fixed Rate Unsecured Green Bonds

Pricing Guidance

14.90% to 15.10% per annum

Tenor

Five (5) Years

Issuer Rating

 ‘Aa-’, Agusto & Co Limited

Bond Rating

‘Aa-’, Agusto & Co. Limited

 

’B2’, Moody’s 

Book Build Opens

Thursday, February 21, 2019

Book Build Closes

Thursday, February 28, 2019

Allocation

Thursday, February 28, 2019

Funding of Commitment

Friday, March 01, 2019

Subscription

Minimum of 5,000,000 (i.e. 5,000 units at 1,000/unit) and multiples of 1,000,000 thereafter

Use of Proceeds

Water - Flood Defense – 84.80%

 

Solar – Generation facilities – 11.73%

 

Agriculture – 1.27%

 

Offer cost – 2.19%

Listing

FMDQ OTC Plc and/or The Nigeria Stock Exchange (NSE)

 

FGN Bonds Update: Bearish Trend Persists into Second Consecutive Week 

This week, the bonds market traded on slightly bearish sentiments as investors traded cautiously due to the postponed elections and in anticipation of the bond auction which held on Wednesday. Consequently, average yield across tenors inched northwards by 4bps to 15.0% from 15.1% recorded the previous week following sustained sell pressures on the 16-Aug-19 (-68bps W-o-W) and 20-Sep-19 (-62bps W-o-W) maturities. 

At the Bond auction which held on Wednesday, the Debt Management Office (“DMO”) offered a total of N150.0bn across the 5-, 7- and 10-year bonds (N50.0bn apiece). The total offer had a bid-to-cover ratio of 1.6x following the oversubscription of the 10-year bond (total subscription of N195.98bn) while the short- and medium-term offers witnessed low demand with a subscription of N9.52bn and N28.85bn respectively. 

Please see details below:


 

12.75% FGN APR 2023

13.53% FGN MAR 2025

13.98% FGN FEB 2028

Auction Date:

20-Feb-19

20-Feb-19

20-Feb-19

Tenors:

5-Year

7-Year

10-Year

Term-To-Maturity:

4 Years, 2 Months

6 Years, 1 Month

9 Years

Amount Offered:

N50.00bn

N50.00bn

N50.00bn

Subscription:

N9.52bn

N28.85bn

N195.98bn

Amount Allotted:

N1.5bn

N12.25bn

N136.25bn

Range of Bids:

14.5000% - 16.0000%

14.2000% - 16.3000%

13.0000% - 16.0000%

Stop Rates:

14.5200%

14.7999%

14.9390%

Previous Stop Rates:

15.2000%

15.2500%

15.3500%

Bid to Cover Ratio:

0.2x

0.6x

3.9x

Allotment Ratio:

0.2x

0.4x

0.7x

 

Going into the week, we anticipate that there will be a reversal of this bearish trend as we expect coupon payments worth N26.3bn to improve demand levels and advise investors to take advantage of the attractive yields on the 2020s maturities.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

1

           14.40

             15.54

                   100.98

Jul-21

2

           14.48

             14.50

                   100.00

Jan-22

3

           14.45

             16.39

                   104.46

Mar-24

5

           14.30

             14.20

                     99.63

Jan-26

7

           14.40

             12.50

                     91.82

Mar-27

8

           14.45

             16.29

                   108.57

Feb-28  

9

           14.56

             13.98

                     92.03

Jul-34

15

           14.16

             12.15

                     87.50

Mar-36

17

           14.10

             12.40

                     89.10

Apr-37

18

           14.09

             16.25

                   113.98

Rates are valid till 01:45pm today (25-Feb-2019)
*Please note that the minimum subscription for Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


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8.     T-bill Yields Compress as Funding Pressures Ease

9.      CBN Avoids OMO Sale, as System Liquidity Dips to Negative

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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