Bullish Run Sustained as Average Yield Falls 100bps WoW


The Nigerian Treasury Bills (“NT-Bills”) secondary market maintained a bullish run last week on the back of improved system liquidity (N198.9bn long on Friday, 30-Jul-21) and as unsuccessful PMA bids filtered in. As a result, the average yield across the curve dipped 100bps W-o-W to close at 5.90% (from 6.90%the previous week) with the 14-Oct-21, 30-Sep-21, and 16-Sep-21 instruments recording the most buying interest, contracting 219bps, 210bps, and 202bps WoW respectively.

At the Primary Market Auction (“PMA”) last week, the Central Bank offered N22.9bn across all maturities and was met with mixed demand with subscription ratios of 0.6x, 0.2x, and 2.7xfor the 91-, 182- and 364-Day instruments respectively. In addition, rates were sustained at the short- and medium-tenured bills while the 364-Day bill declined again by 47bps to stop at 8.20%.

Please see details below:

Auction Date 28-Jul-21 28-Jul-21 28-Jul-21
Allotment Date 29-Jul-21 29-Jul-21 29-Jul-21
Maturity Date 28-Oct-21 27-Jan-22 28-Jul-22
Tenor 91-Day 182-Day 364-Day
Offer (₦) 7,193,228,000.00 47,476,888,000.00 161,522,566,000.00
Subscription (₦) 4,225,989,000.00 8,419,200,000.00 440,286,686,000.00
Allotment (₦) 3,174,989,000.00 3,536,200,000.00 258,527,896,000.00
Range of Bids (%) 2.4900 – 10.0000 3.3999 – 12.0000 7.7000 – 9.6000
Previous stop rates 2.50 3.50 8.67
Current Stop Rates (%) 2.50 3.50 8.20
Bid-to-Cover Ratio 1.3x 2.4x 1.7x
Allotment Ratio 0.4x 0.1x 1.6x
Subscription Ratio 0.6x 0.2x 2.7x

Going into the week, we expect active trading sessions in the NT-Bills secondary market on the back of improved system liquidity which stood at N230.9bn in the positive as of Friday. Thus, we advise investors to position in relatively attractive yields across the curve. Additionally, qualified investors may take advantage of available Commercial Paper Offerings.

Please see the indicative secondary market NT-Bills rates below:

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
28-Oct-21 87 3.30 3.33
25-Nov-21 115 4.20 4.26
13-Jan-22 164 4.63 4.73
10-Mar-22 220 5.35 5.53
12-May-22 283 6.24 6.56
9-Jun-22 311 7.26 7.74

Rates are valid till 01:45 pm today (02-Aug-21)

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

Commercial Paper Update: United Capital Plc Offers 11.91%% & 13.00% Yields on 180 & 270-day Tenors Respectively

Please see below, the indicative terms of the proposed offer:

Issuer: United Capital Plc
Arrangers FSDH Capital Limited, United Capital Plc, UCML Capital Limited
Series: 5 6
Tenor: 180 days 270 days
Implied Yield: 11.91% 13.00%
Discount Rate: 11.25% 11.86%
Maturity: Tuesday, 01 February  2022 Monday, 02 May 2022
Pricing Method: Fixed Price
Target Size: Up to N20 Billion
Offer Open: Thursday, 29 July 2021
Offer Close: Wednesday, 04 August 2021
Allocation: Wednesday, 04 August 2021
Funding Date: Thursday, 05 August 2021
Issuer Rating: ‘A’ by DataPro Limited; ‘A-‘ by Agusto & Co. Limited
Minimum Subscription: N5   million and multiples of N1,000 thereafter
Use of Proceeds: Short-term working capital requirements
Tax Consideration: Free and clear of withholding taxes

Offer Valid till 09:00 am on Wednesday (04-Aug-21)
*Please note that the minimum subscription for Commercial Papers is N5,000,000.00.

FGN Bonds Update: Average Yield Dropped Marginally by 2bps WoW

We witnessed a mixed performance in the FGN Bond secondary market last week, as investors adjust their portfolios with relatively attractive yields across the curve. Consequently, the average yield on all instruments contracted slightly by 2bps W-o-W to close at 12.07%(from 12.09% the previous week).

Specifically, the short- and long-tenured instruments witnessed the most demand, as average yield dipped 15bps and 4bps W-o-W respectively.

Going into the week, we expect a sustained bullish trend in the secondary market particularly in the short- to mid-end of the curve. Therefore, we maintain our advice that investors position in attractive yields along the curve, particularly at the mid-dated instruments which gained the previous week.

Please see indicative secondary market bonds rates below:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Apr-23 2 9.30 12.75 105.37
Mar-24 3 9.80 14.20 109.90
Mar-25 4 10.30 13.53 109.56
Jan-26 5 11.10 12.50 104.82
Mar-27 6 11.60 16.29 118.93
Feb-28 7 11.55 13.98 110.95
Jul-34 13 11.95 12.15 101.28
Mar-36 15 12.40 12.40 99.96
Apr-37 16 12.30 16.25 127.13
Apr-49 28 12.30 14.80 119.53

Rates are valid till 01:45 pm today (02-Aug-21)

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