Sustained Demand Amid Absence Of OMO Auction Compresses Average Yield To 12.1% Down 25bps WoW

Proshare

Tuesday, July 2, 2019 09:00AM /By Afrinvest Research


In line with our expectation, the Treasury Bills (“T-Bills”) secondary market started the week on a bullish note as buying interests were witnessed in the medium- to long-tenured bills following robust system liquidity (N247.3bn long as at Monday). This bullish trend persisted throughout the rest of the week as the Central Bank of Nigeria (“CBN”) remained quiet regarding Open Market Operations (“OMO”) for the third consecutive week while inflows from maturing T-Bills pushed liquidity levels higher to N548.2bn positive as at Thursday.

Consequently, yields were further compressed by 0.25% W-o-W to 12.1% from 12.4% the previous week. Particularly, strong demand was witnessed in the 03-Oct-19 (-121bps), 30-Apr-20 (-94bps) and 11-Jun-20 (-80bps) bills as average yields on medium to long-dated maturities tightened by 0.4% apiece W-o-W.

This week, we expect a slight moderation in demand within the secondary market in anticipation of a Primary Market Auction (“PMA”) slated for Wednesday where the CBN will rollover a total of N88.9bn across the short- (N10.0bn), medium- (N20.0bn) and long-term (N58.9bn) maturities.


Please see below our PMA expectations:

Auction Date

03-Jul-19

03-Jul-19

03-Jul-19

Allotment / Issue Date

04-Jul-19

04-Jul-19

04-Jul-19

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer Amount (N)

10,000,000,000

20,000,000,000

58,857,010,000

Previous Stop Rates (%):

9.6

11.89

12.02

Expected Stop-rates

9.6%-10.0%

11.7%-11.9%

11.9%-12.10%


However, we maintain a bullish outlook for the secondary market stemming from the sustained buoyant liquidity levels (N343.9bn positive as at Friday) combined with N88.9bn worth of T-Bills maturities scheduled to hit the financial system on Thursday and anticipate a resumption of interventions by the Apex bank. Thus, we advise investors to take advantage of the relatively more attractive yields at the longer end of the curve.


Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

19-Sep-19

80

9.00

9.13

3-Oct-19

94

10.30

10.58

31-Oct-19

122

10.30

10.62

5-Dec-19

157

10.70

11.22

16-Jan-20

199

11.01

11.71

6-Feb-20

220

11.10

11.84

20-Feb-20

234

11.15

12.01

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 (01-Jul-19)


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

FGN Bonds Market Update: Another Bullish Run as Average Yield Declines 49bps W-o-W to 13.2%

Last week, the bonds market performance remained bullish as renewed buying interest was witnessed across the curve following the bond auction (1.7x oversubscribed) which held on Wednesday. Consequently, average yield declined by 49bps W-o-W from 13.8% the prior week to 13.2%, with the 2020s and 2021s maturities enjoying the most buying interests.

At the bond auction, the Debt Management Office (“DMO”) offered a total of N100.0bn across the 5-, 10- and 30-year maturities, and significant demand was witnessed across all tenors as the offer was 1.7x oversubscribed. The long-term offer enjoyed the most buying interest with a bid-to-cover ratio of 2.0x (N60.49bn subscribed vs. N30.0bn offered).


Please see detailed result below:

BOND

12.75% FGN APR 2023

NEW FGN APR 2029

NEW FGN APR 2049

Term-To-Maturity

3 Years, 10 months

9 Years, 10 months

29 Years, 10 months

Amount on Offer

30,000,000,000

40,000,000,000

30,000,000,000

Total Subscription (N)

39,400,000,000

60,300,000,000

60,490,000,000

Amount Allotted: (N)

28,990,000,000

36,360,000,000

31,490,000,000

Range of Bid Rates (%)

14.00% - 15.30%

13.90% - 16.55%

14.00% - 15.78%

Stop Rates (%)

14.30%

14.50%

14.68%

Previous Stop Rates (%)

14.11%

14.24%

14.49%

Bid-to-Cover Ratio

1.3x

1.5x

2.0x

Allotment Ratio

0.7x

0.6x

0.5x


This week, we expect persistent buying interests within the bonds secondary market as investors seek to place their lost auction bids, further pressuring yields downwards. Therefore, we advise investors to take advantage of the attractive yields along the shorter end of the curve due to the contracting T-Bills yields.


Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jul-21

2

           13.60

             14.50

                   101.54

Jan-22

3

           13.50

             16.39

                   106.08

Apr-23

4

           14.10

             12.75

                     96.06

Mar-24

5

           13.90

             14.20

                   100.95

Mar-25

6

           13.85

             13.53

                     98.71

Jan-26

7

           14.20

             12.50

                     92.87

Mar-27

8

           14.10

             16.29

                   110.02

Feb-28

9

           14.23

             13.98

                     98.73

Jul-34

15

           14.30

             12.15

                     86.82

Mar-36

17

           14.29

             12.40

                     88.04

Apr-37

18

           14.31

             16.25

                   112.33


Rates are valid till 01:45pm today (01-Jul-19)


*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


Related News

1.          June 2019 FGN Bond Oversubscribed

2.         Expected N351bn FGN Bond Maturity to Boost Auction Demand

3.         Nigerian Breweries Plc Up To N15bn Series 3 and 4 Commercial Paper Issue Now Open

4.         Nigerian Bank Eurobonds Maintain Rally as First Bank Announces Call on its 2021 Maturity

5.         Average Money Market Rate Rose By 3.46% To Settle At 8.96% Up From 5.50%

6.         Bullish Run Sustained on Buoyant System Liquidity as Average Yield Dips 3bps WoW to 12.39%

7.          Invest in FGN Monthly Bond Auction – June 2019

8.         DMO Clarifies Media Reports on Eurobond Issuance by Nigeria in 2019

9.         Nigerian Eurobonds Maintain Strong Rally as Global Central Banks Turn Dovish

10.     Lafarge Africa Plc Redeemed Its N26.4 Billion Series 1 Bond Due On June 15, 2019

11.       Nigerian Eurobonds Surge on Trump-Xi’s Planned Meeting at G-20 Summit

12.      A Quiet Trading Session as Primary Market T-Bills Auction Takes Centre Stage

13.      Market Interest Rates Edge Upwards

14.      June 2019 FGN Savings Bonds Offer for Subscription

15.      Average Money Market Rate Rose By 6.61% To Settle At 11.15% Due To Constraint In System Liquidity



Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP