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Debt Securities

Interbank FX rate rises amid slowdown in reserve accretion

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FGN Savings Bond

NASS pass 2018 budget, raise spending to N9.1 trillion, oil benchmark to $51 

KEY INDICATORS

Inflation12.48%Declined by 0.86% in April from 13.34% in March 2018
MPR14.00%Left unchanged at 14.00% at the MPC meeting 0n 4th April 2018
External Reserves$47.79billionDecline by0.10% as at 14 May from $47.84bn as at 11th May 2018
Brent Crude$78.09pbFell by0.98% from $78.86pb on 11th May 2018

  

Bonds

The bond market traded on a relatively quiet note, with yields ticking slightly higher by c.1bp due to slight sell on the 2036s and 2027s towards close of trading. We expect some price recovery in the near term, as the yield premium on inflation is relatively attractive especially to the local institutional clients.

This view would be strengthened by a further moderation in T-bill yields, especially if the CBN decides to relax its current liquidity tightening posture.

Specta
FGN Bonds
DescriptionBid (%)Offer (%)Day Change (%)
16.00 29-Jun-1911.4511.07(0.01)
15.54 13-Feb-2013.1812.61(0.04)
14.50 15-Jul-2113.5013.400.02
16.39 27-Jan-2213.4313.310.04
14.20 14-Mar-2413.3413.180.01
12.50 22-Jan-2613.4613.270.03
16.29 17-Mar-2713.3713.340.01
12.15 18-Jul-3413.3013.28(0.03)
12.40 18-Mar-3613.3213.22(0.01)
16.25 18-Apr-3713.2813.240.05

Source: Zedcrest Dealing Desk

Treasury Bills

Yields in the T-bills Space moderated further downwards by c.10bps as market players began to price in their OMO auction expectations for tomorrow, with the auction largely expected to clear at +5bps (11.10/12.20) based on prior trends. The PMA auction by the CBN was fairly subscribed, mostly from non-competitive client bids.

The auction stop rates consequently cleared at about 150bps below their secondary market levels. We expect a relatively quiet trading session tomorrow, as market players shift focus to the OMO T-bill auction, which we do not expect to be heavily subscribed due to the liquidity strain in the market.

Treasury Bills
DescriptionBid (%)Offer (%)Day Change (%)
14-Jun-1812.5011.750.00
5-Jul-1813.5011.750.00
2-Aug-1813.0012.00(0.50)
13-Sep-1813.5012.500.00
4-Oct-1813.5012.500.00
1-Nov-1813.0012.000.00
6-Dec-1812.6012.35(0.20)
3-Jan-1912.6512.40(0.05)
14-Feb-1912.5011.500.00
14-Mar-1912.5011.000.00
4-Apr-1912.5011.000.00

Source: Zedcrest Dealing Desk

NTB PMA Result
TenorRate (%)Offer (N’bn)Sub (N’bn)Sale (N’bn)
91 days10.003.383.713.38
182 days10.5016.9220.9016.92
364 days10.7013.5448.6013.54

Source: CBN

Money Market

The OBB and OVN rates rose to 23.33% and 24.67%, as system liquidity still remained tight at c.N63bn negative. We expect rates to decline slightly tomorrow on the back of expected inflows OMO T-bill and net PMA repayments (N296bn). This is however baring a significant OMO T-bill sale by the CBN.

Money Market Rates
 Current (%)Previous (%)
Open Buy Back (OBB)23.3315.33
Overnight (O/N)24.6716.42

Source: FMDQ, Zedcrest Research

FX Market

The Interbank rate depreciated by 0.02% to N305.85/$ from its previous rate of N305.80/$. This was just as the CBN’s external reserves posted a 2-day decretion of $72m down to $47.79bn as at 14-May. The NAFEX closing rate appreciated by 0.23% to N360.77/$, while rates in the Unofficial market remained stable at N362.00/ $.

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 FX Rates
 Current (N/$)Previous ( N/$)
CBN Spot305.85305.80
CBN SMIS330.00330.00
I&E FX Window360.77361.61
Parallel Market362.00362.00

Source: CBN, FMDQ, REXEL BDC

Polaris bank

Eurobonds:

The NGERIA Sovereigns remained slightly bearish with yields inching slightly higher by c.3bps on average. The 27s and 47s were the most traded and lost about –0.15pt on average.

The NGERIA Corps were also bearish across all traded tickers except for the ACCESS 21s Snr which posted a marginal gain of +0.10pt. The Zenith 19s and 22s recorded the highest loses of about -0.15pt.

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Debt Securities

UPDC moves to redeem N4.355 billion bonds

UPDC is set to redeem its N4,355 billion Series 1 Bonds on the 26th of April, 2021.

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UACN Property Development Company Plc (UPDC) is set to redeem its N4,355 billion Series 1 Bonds on the 26th of April, 2021.

This information was contained in a notice tagged “Notice to the Bondholders of UACN Property Development Plc”, issued by the Company Secretary, Folake Kalaro.

According to the information contained in the notice, UPDC, under Condition 3.2 of the Terms and Conditions of the Bonds, will redeem the N4,355,000,000 Series 1 Bonds on the 26th of April, 2021 from the bondholders, together with the accrued Coupon (the annual interest rate paid on the bond) up to, but excluding the Redemption Date.

The company revealed that the Coupon on the Bonds will cease to accrue on and after the Redemption Date.

What you should know

  • On the Bond’s Redemption Date, it is important to note that the Registrar of the Bonds, Africa Prudential Plc, shall pay to each Bondholder’s designated account, the amount payable to him/her in respect of the Redemption.
  • The Redemption payment to the Bondholders shall be equal to 100% of the principal amount together with all accrued and unpaid Coupon. Following the Redemption, the listing of the Bonds on the FMDQ Securities Exchange Limited will be canceled.
  • It is essential to understand that the N4.355 billion Series 1 Senior Guaranteed Fixed Rate Bond Due 2023 under UPDC’s N20 billion Bond Issuance Programme, was listed in 2018 following the approval of the SEC.
  • The move to issue the N4.355 billion bonds was made following an unsuccessful attempt to raise N5.16 billion via a rights issue, which recorded subscription for 879.65 million ordinary shares valued at N2.64 billion.

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Debt Securities

Ecobank Nigeria secures N50 billion 10-Year subordinated loan

Ecobank Nigeria has secured a N50 billion, 10-year bilateral subordinated loan.

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Ecobank Nigeria

Ecobank Nigeria, a subsidiary of Ecobank Transnational Incorporated (‘’ETI’’) has announced that it has secured a N50 billion, 10-year bilateral subordinated loan.

This is according to a disclosure signed by the Group Head, Adenike Laoye and sent to the Nigerian Stock Exchange, as seen by Nairametrics.

The bilateral funding will enable the bank to maintain stable liquidity and improve its balance sheet, especially the capital adequacy ratio by an estimated circa 300 basis points.

What they are saying

The disclosure from the bank read thus:

“Ecobank Transnational Incorporated (“ETI”), the parent of the Ecobank Group, announces that one of its significant subsidiaries, Ecobank Nigeria, secured N50 billion, 10-Year bilateral subordinated loan.

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“The bilateral funding provides stable medium-term liquidity to the balance sheet of Ecobank Nigeria and positively improved its balance sheet ratios, especially the capital adequacy ratio by circa 300 basis points. The transaction proceeds would be deployed to support Micro, Small and Medium Scale Enterprises (“MSMEs”) and Small Corporates.”

What you should know

Ecobank Transnational Inc. had earlier recorded 11% rise in its interest income to N139.6 billion for Q3 2020, as captured by Nairametrics.

  • Subordinated loans have lower priority than other debt instruments in case of liquidation. They are only repayable after other debts have been paid.
  • This debt can either be secured or unsecured and it typically has a lower credit rating and higher yield than other senior debt.

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Companies

Flour Mills moves to diversify funding sources with N29.8 billion bond listing

Flour Mills Nigeria Plc lists N29.8 billion bonds to diversify funding sources from the Nigerian capital market.

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Flour Mills makes one of the largest contributions to COVID-19 relief fund

Flour Mills Nigeria Plc’s fresh N29.8 bond listing will help the nation’s leading food business company to explore diversified funding sources from the Nigerian capital market, with the hope of enhancing growth and the development of the company.

This statement was made by the Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the listing of the Tranche A and Tranche B bonds valued at N29.8 billion on the Nigerian Stock Exchange (NSE).

The food and the agro-allied company which has remained Nigeria’s largest and oldest integrated agro-allied business with a broad profile and robust Pan-Africa distribution issued these bonds under its N70 billion Bond Issuance Programme.

Olusanya said that the company would continue to explore funding opportunities inherent in the capital market to ensure business growth and continuity.

While speaking about the Credit Rating of the Programme, he disclosed that FMN’s credit rating, as well as the operational financing of the Group, have improved considerably.

Specta

According to him, the bonds floated by Flour Mill will help to strengthen the company’s capital base and provide the needed working capital required by the Company. He added that Flour Mills Group will continue to deleverage and replace short term financing with longer-tenured and lower price funding to optimize capital structure and reduce financing cost.

He noted that Flour Mills will continue to explore opportunities to raise fundings via the capital market as this enables the company to diversify its funding sources and continue to play a role in the capital market as a significant player in it.

What they are saying

The Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the virtual event, said;

Deal book 300 x 250
  • “We are delighted with the response from the market, we are happy to be listed.
  • “We are introducing an N29.9 billion listing under an N70 billion bond issuance cover; we will continue to raise funding to diversify our funding sources.
  • “The company remains passionate about feeding the nation to improve the quality of living for Nigerians through increased production and investments in backward integration.”

What you should know

  • With the successful issuance of the new N29.8bn Tranche A and Bonds, FMN has utilized its bond issuance program registered in 2018.
  • It is important to note that the Senior Unsecured bond listing includes an N4.89bn under Series 4 Tranche A of the bond issuance programme, at a 5.5% rate for 5 years, due by 2025, and a 25bn under Series 4 Tranche B of the same program at a 6.25% rate for a tenure of 7 years, due by 2027.
  • The bond proceeds will be used to refinance existing debt obligations. It will also help the company take collaborative actions to diversify the company’s financing options beyond expensive short term debt.

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