Culled—Proshare

May 4, 2020/

by Afrinvest Research

In the four-day trading sessions of last week, activity level in the Nigerian Treasury Bills (“NT-Bills”) secondary market remained mute as weak sentiments persisted across the yield curve. Although system liquidity improved (N638.0bn long as at Thursday) following inflows from a CRR refund on Monday and bond coupon payments on Tuesday, investors traded cautiously in anticipation of the Primary Market Auction (“PMA”) that held on Wednesday.

Notably, the short and mid segment of the yield curve closed flat W-o-W while the long end of the curve witnessed mild demand on the 29-Oct-20 (-5bps) and 12-Nov-20 (-3bps) bills. As a result, average yield across all tenors shed 1bp W-o-W to remain at 2.7%.

At the PMA, the CBN rolled over a total of N131.5bn following a strong demand of N268.2bn. All tenors were oversubscribed with the most demand recorded on the 182-day tenor which had a 2.6x bid to cover ratio. Consequently, stop rates across the short, medium and long term instruments closed lower at 1.85%, 2.49% and 3.84% respectively. 

Please see detailed PMA results below: 

This week, inflow from OMO maturities worth N18.5bn is expected to hit the financial system.  We expect trading activities to improve as Federal Government relax lockdown from today coupled with pockets of unfilled bids from the PMA filter into the market. We also expect more companies to take advantage of the low yield environment by issuing Commercial Paper which will provide alternative investment options to investors. 

Please see indicative secondary market NT-Bills rates below:

Rates are valid till 01:45pm today (4-May-2020)

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

Bonds Update: Domestic Debt Set to Rise as Senate Approves DMO’s N850.0bn Domestic Loan; Average Yield Contracts W-o-W by 30bps

The bullish sentiments in the bond market was sustained last week as improved domestic demand drove performance. As a result, average yield declined 30bps W-o-W to settle at 10.2% from 10.5% the previous week. The Mar-25 bond witnessed the most buying interest (-166bps) trailed by the Mar-36 (-86bps) and Jan-22 (-0.60bps) instruments.

During the week, the International Monetary Fund (“IMF”) approved Nigeria’s request for emergency financial assistance worth $3.4bn under the Rapid Financing Instrument (RFI). The loan facility which matures in 5 years is geared to help the Federal Government finance its budget deficit as well as tackle the impact of COVID-19.

Also, the Debt Management Office (“DMO”) secured approval from the Senate to raise N850.0bn from the domestic debt market following its decision to switch from planned external borrowings in the 2020 appropriation act. As a result, we expect the DMO to revise its bonds issuance calendar in the coming weeks upon final clearance by the House of Representatives. This will likely guide market sentiments as investors anticipate more attractive yields.

This week, we anticipate information on the May FGN Savings Bond from the DMO. In addition, we envisage the momentum from last week trading sessions to be sustained, albeit at a slower pace, as investors bargain hunt for bonds with attractive yields. 

Please see indicative FGN bond rates below: