- Investors Maintain Appetite for Short-dated Instruments
The bond market recorded moderate activities in both the primary and secondary markets last week as investors continued to show preference for short-dated instruments.
Nonetheless, the yields on treasury bonds pared moderately by four basis points last week to settle at 15.3 per cent.
This, was due to increased buy interest on the final trading day of the week, before which yields had increased moderately by one basis points, analysts at Afrinvest Securities stated in their latest report.
They noted that the yield differential between Treasury bills would likely result in a persistence of the trend witnessed over second half 2018 to date. “Although we expect yields on FGN bonds to trend upwards over the short-term. In the Sub-Saharan Eurobond market, demand levels were sustained into this week, as the average yield declined by 36 basis points to settle at 7.8 per cent.
“There were yield declines witnessed across all bonds, save for the Mozambique Eurobond, which recorded an eight basis points increase to settle at 14.1 per cent.
“On the flip side, the largest declines in yields were recorded on the Ghana and Kenya Eurobonds, which recorded average declines in Ask-yields of 45 basis points and 40 basis points respectively, to settle at 7.8 per cent and 7.7 per cent,” it added.
Similarly, the report showed that average yield on Nigeria’s Eurobonds pared in the week’s trading by 47 basis points to settle at 7.5 per cent.
“The resurgence in interest in assets is in line with our expectations and trend in election years. We expect continued interest in US Dollar assets through to H2:2019 as investors remain wary of risk factors on the horizon that could potentially affect the value of the naira,” the report added.
In addition, it noted that the trend in the corporate Eurobonds space closely mirrored that of Sub-saharan Eurobonds, as the average yield pared by 20 basis points to settle at 7.6 per cent. There were also yield declines across all bonds save for the Diamond Bank 2019 bond, which recorded a yield increase of 162 basis points to settle at 13.1 per cent.
This was expected as investors were anticipated to take profit on the instrument given the decline in the yield of the bond following the announcement of the bank’s merger with Access Bank Plc. Also, there was significant demand for the FBNH 2021 Eurobond during the week, as the Ask-yield on the bond declined by 1.5 per cent to settle at 6.3 per cent.
“Similar to our expectations for Nigeria Sovereign Eurobonds, we project the yields on these bonds to pare over the short-term given factors stated.”
Interbank Naira Market
Activities in the money market last week were somewhat muted as system liquidity remained in the negative region.
This followed the aggressive pace of open market auctions (OMO) by the Central Bank of Nigeria (CBN) last Tuesday and Thursday in its bid to prevent speculative sentiments in the market ahead of the upcoming presidential elections.
Tuesday’s auction saw the CBN offer OMO bills worth N60 billion, although it was largely undersubscribed, at N10.7 billion despite attractive rates on the offer: 107-day (11.9%), 170-day (13.5%) and 317-day (15.0%). Furthermore, maturity expectations on OMO instruments worth N375.4 billion saw the issuance of another OMO tranche on Thursday in an offer worth N400 billion, which was also largely undersubscribed.
Only the 364-day OMO bill was 1.13x subscribed while the 91-day (11.9%) and the 189-day (13.5%) were both undersubscribed by 0.12x and 0.02x.
Direction of rates in the secondary market saw money market rates – OBB (Open Buy Back) and OVN (Overnight) – rise further from 20 per cent and 23.8 per cent at close of the preceding week to 22.7 per cent and 24.7 per cent last week.
Notably, rates surged to 26.67 per cent (OBB) and 27.67 per cent (OVN) on Wednesday, following Tuesday’s surprise OMO auction as system liquidity worsened to the negative region. In the secondary T-bills market, bullish sentiment, especially for long tenor instruments, saw average yields decline 56 basis points to 13.52 per cent on Friday from 14.1 the preceding week.
This week, central bank is scheduled to repay N429.6 billion maturing treasury bills with the same sum rolled over.
“We expect rates at the auction to remain at attractive levels in line with recent trend while we anticipate a near muted activity in the secondary market.
“Also, in line with its tight system liquidity posture, we expect conduct of OMO auctions by the CBN next week to offset maturities worth N560.9 billion.”
CBN Pays N14.35 Billion for 263,860 Meters to End Estimated Billings
The Central Bank of Nigeria (CBN) said it has disbursed a total sum of N14.35 billion to the Distribution Companies of Nigeria (DisCOs) for the payment of 263,860 meters under the National Mass Metering Programme (NMMP).
In November 2020, the Federal Government announced that it would make funds available for 1 million meters in the first phase of President Buhari Mass Metering Initiative at no cost to consumers.
Between November 2020 and January 2021, the Federal Government through the CBN has disbursed N14.35 billion.
However, according to the apex bank DisCOs must pay back the amount disbursed based on the previously agreed amortisation schedule.
“The facility disbursed is a loan that must be repaid by the DisCos on the basis of the previously agreed amortisation schedule. The repayment is to be deducted from payments made by consumers into the DisCos accounts with Deposit Money Banks (DMBs),” the CBN stated.
“The maximum tenor of the facility is 10 years but not exceeding 2030, while the moratorium on the principal amount is for a period not exceeding 24 months from the date of loan disbursement.”
A week ago, the Ibadan Electricity Distribution Company (IBEDC) announced it has commenced the distribution of 104,0000 free meters in Ibadan, Oyo State.
This, the IBEDC said was under the ongoing National Metering Scheme of president Muhammadu Buhari.
FG Borrows N2.36 Trillion from Capital Market in 2020
Mr. Oscar Onyema, the Chief Executive Officer, Nigerian Stock Exchange, said the Federal Government borrowed N2.36 trillion from the nation’s capital market in 2020.
The CEO disclosed this at the 2020 market recap/2021 outlook held on Tuesday.
He said the Federal Government issuances account for 92 percent of the total bond issued in the market in the year.
Onyema further explained that corporate organisations leveraged on low yield environment to expand and embark on debt refinancing, raising a total of N192 billion,
“Capital-raising activities in the fixed income market increased significantly in 2020. The NSE’s bond market capitalisation rose by 35.52 per cent from N12.92tn in 2019 to N17.50tn,” he said.
Onyema noted that “The year 2020 was indeed a historic one for global capital markets. Facing buffeting headwinds, world markets saw sharp swings and steep losses, but largely remained resilient and orderly amid rising uncertainty.
“For The Exchange, renewed investor optimism coupled with improved economic conditions and low fixed income yields, propelled a year end bull run. Of 93 global equity indices tracked by Bloomberg, the NSE All Share Index emerged the best-performing index in the world, surpassing the S&P 500 (+16.26 per cent), Dow Jones Industrial Index (+7.25 per cent) and other global and African market indexes, to post a one-year return of +50.03 per cent.”
Speaking on product results for the year, the CEO said, “The Nigerian equities market got off to a strong start in 2020, returning 10.4 per cent by the eighth trading session. By October, the equities market entered a much-awaited bull run.
“Buoyed by the formal declaration of the US president-elect, unattractive fixed income yields and better-than-expected corporate earnings, the NSE ASI recovered from Q1’20, to close the year at 40,270.72 (+50.03 per cent) and erase losses of -14.90 per cent recorded in 2019.
“During its remarkable year end run, the ASI gained 6.23 per cent in a single trading session which triggered a 30-minute halt of trading on all stocks for the first time since the NSE Circuit Breaker was introduced in 2016 to safeguard market integrity in periods of extraordinary volatility.
“At the close of the year, the NSE’s equity market capitalisation was up by 62.42 per cent, from N12.97tn in 2019 to N21.06tn in 2020 while market turnover saw an uptick of 7.25 per cent, from N0.96tn in 2019 to N1.03Tn in 2020.
“Although Initial Public Offering activity was mute, the value of supplementary issues increased dramatically from 2019, rising by 851.37 per cent to N1.42tn, from N148.77bn.
“Also noteworthy is that for the second consecutive year, equity market transactions were dominated by domestic investors who accounted for 65.28 per cent of market turnover by value (retail: 44.98 per cent; institutional: 55.02 per cent) while foreign portfolio investors accounted for 34.72 per cent.”
Airtel to Announce Financial Results for Nine Months Ended December 31, 2020 on 29 January 2021
Airtel Africa, one of the leading telecommunications companies in Africa, on Wednesday announced it will report its financial statements for the nine months ended December 31, 2020 on January 29, 2021.
The telecom giant disclosed in a statement signed by Simon O’Hara, Group Company Secretary.
The statement reads “Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, will announce its results for the nine months to 31 December 2020 on 29 January 2021.
“Management will host a conference call on the day of results for analysts and investors at 2:00pm GMT.
“Participants are requested to pre-register for the call by navigating to:
“Once registered, participants will receive a calendar invitation with the dial in details for the call.”
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