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Debt Securities

Daily update on Treasury Bills, Bonds, Forex, oil price and more

Daily performance of major economic indicators and highlights from tradings sessions and key statistics such as Treasury Bills, bonds, FX rates, inflation, oil price.

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Nigerian stock exchange, All share index, Nigerian bourse, Investors, Bulls gather momentum ASI up 0.48%, gained N55.3 billion, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum

Daily performance of major economic indicators and highlights from tradings sessions and key statistics such as Treasury Bills, bonds, forex, inflation, oil price.

  • FGN Bond auction undersubscribed by 11% amidst weak investor appetite
  • Headline year-on-year (YoY) Inflation falls to 11.26% in October, compared to 11.28% in September

KEY INDICATORS

Bonds

The FGN bond market was scantily traded as market participants focused on the outcome of the Bond auction floated by the DMO today. While spreads in the market adjusted closer amidst bearish sentiments, yields consequently ticked marginally higher by c.1bp on the average across the curve.

The FGN Bond Auction conducted by the DMO today was undersubscribed, with an 89% bid to cover, showing weak investor appetite towards the auction. The DMO was only able to raise a total of c.N39bn out of the N115bn on offer as investors demanded for higher yields. Stop rates ticked higher than the previous auction to close at 15.20% (20bps higher) for the 5-yr, 15.50% (35bps higher) for the 7-yr and 15.83% (51bps higher) for the 10-year papers.

We expect market to remain risk-off on bonds in the interim, as investors look to fill demands for higher yields at the next auction which comes up in 3-weekstime.

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Treasury Bills

Trading activity picked up in the T-bills market after the break, albeit with a bearish bias. We witnessed sell-offs from local and foreign participants along the mid- to long-end of the T-bill curve, as the final MPC meeting of the year commenced today. Yields consequently expanded by c.8bps across the T-bills curve, with the 03-Oct-2019 maturity hitting an intraday high of 14.80%.

With supply expected via an OMO auction tomorrow, we maintain our expectations for yields to trend upwards for the rest of the week.

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Money Market

Money Market rates moderated a little today as there were no major inflows/outflows hitting the banking system. The OBB and OVN dropped by c.0.33bps to close at 9.67% and 10.67% respectively, as system liquidity remained stable at c.N250bn.

We expect rates to further drop tomorrow due to inflows of c.N408bn coming from OMO T-bills maturities. The CBN is however expected to mop up excess liquidity from the system through the sale of OMO T-bills to moderate inflationary pressures.

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.75/$ (spot) and dropped by c.N1.04k to close at N360.85/$ (SMIS). At the I&E FX window a total of $348.02bn was traded in 220 deals, with rates ranging between N360.00/$ – N365.00/$. The NAFEX closing rate appreciated by c.0.16% to N364.26/$ from N363.69/$ previously.

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At the parallel market segment, the cash and transfer rates both remained unchanged to close N364.00/$ and N366.50/$ respectively.

Stanbic IBTC

Eurobonds

The NGERIA Sovereigns continued to underperform amongst its Sub-Saharan Africa peers due to the recent bearish oil market and general election sentiment. We saw little interest on the NGERIA 27s and 49s as flows reduced ahead of the U.S. Thanksgiving bank holiday set for tomorrow.

Similarly, we witnessed little interest across major NGERIA Corps tickers. The DIAMBK 19s bond holders were also credited coupon today. We believe this should spur more buying interest going forward as the yield on the bond remains the most attractive amongst its peers.


Disclaimer:

Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

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Debt Securities

United Capital Plc raises N15 billion through Commercial Paper

United Capital Plc. has successfully raised the sum of N15billion in its recently issued Series 3 Commercial Paper.

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Commercial paper, United Capital Asset Management explains mutual funds’ positive performance

United Capital Plc. has announced that it has successfully raised the sum of N15billion in its recently issued Series 3 Commercial Paper (‘’CP’’) under a N20billion programme registered with the FMDQ Securities Exchange.

This is according to a disclosure signed by the firm’s Secretary, Leo Okafor, and sent to the Nigerian Stock Exchange market.

READ: United Capital Plc releases H2 2020 Outlook report titled “Up In The Air”

The recent corporate action is sequel to successfully raising the sum of N5.3 billion in April 2020, through a debut Series 1&2 Commercial Paper issuance.

READ: CardinalStone’s Debut Commercial Paper Issuance records 148% subscription

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What you should know

  • The Series 3 issuance with a maturity period of 270 days was issued at a yield of 1.26% and had a subscription of circa 112% with firm commitments from a pool of institutional investors, particularly Asset Managers.
  • This issuance set another ground breaking record in the Nigerian Capital Markets, being the lowest yield on record for a 270-day CP issuance by a nonbank issuer.
  • FSDH Capital Limited, United Capital Plc, and UCML Capital Limited, acted as arrangers to the transaction.
  • According to Investopedia, Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.

(READ MORE: Zenith Bank discloses projections following release of CBN’s latest Treasury Bills calender)

  • Maturities on commercial paper typically last several days, and rarely range longer than 270 days. In addition, Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.

READ: Dangote Cement’s N100 billion CP admitted on FMDQ Securities Exchange

What they are saying

Commenting on the recent development, the Group Chief Executive Officer, Mr. Peter Ashade said: “The commercial paper issuance is in line with our bid to diversify our funding sources, strengthen our capital base and intensify our strategic initiatives aimed at providing innovative financing solutions to our clients.”

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Debt Securities

N200 billion Unclaimed Dividend: Securities dealers reject FG’s plan to manage fund

ASHON has rejected plans by the Federal Government of Nigeria to manage the N200 million unclaimed dividends.

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Some capital market experts, represented by the Chairman of the Association of Securities Dealing Houses of Nigeria, have rejected plans by the Federal Government of Nigeria to manage unclaimed dividends – which is projected to hit N200bn by the end of this year, according to a report by Punch.

The Chairman, Association of Securities Dealing Houses of Nigeria, Onyenwechukwu Ezeagu, explained that capital market regulators and operators had leveraged technology to put in place many initiatives to address the issue of unclaimed dividends. Some of these initiatives include de-materialization of shares, which entails upload of quoted companies share in the Central Securities Clearing System for ease of reconciliation, adoption of e-dividend and e-mandate, consolidation of multiple accounts, identity management engagements, and introduction of electronic Initial Public Offering.

(READ MORE: Nigeria needs $5billion for National Broadband Plan – Chairman, BISC)

What they are saying

Commenting on the recent development, Mr. Ezeagu said, “Generally, the incentives for savers and capital providers in the capital market is the expectation of dividends and capital appreciation.

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It is, therefore, our considered view that the proposed legislation, if passed, will be a great disincentive to savings, long-term capital mobilization, and serious disruption of the Nigerian economy, since it will take away the only expectation of investors in the market.”

Corroborating him, the President, Chartered Institute of Stockbrokers, Mr. Olatunde Amolegbe, said the Securities and Exchange Commission would always ensure the transfer of unclaimed dividends to the capital reserves of the company for restricted utilization, such as capital expansion and issuance of bonus shares to the company’s shareholders.

What you should know

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Nairametrics had earlier reported that some law makers (Reps) raised alarm over N200 billion unclaimed dividends in 2020. In lieu of this perceived need, a proposal for the creation of an unclaimed dividend and utilized bank balance trust fund was emphasized in the 2020 Finance Bill — wherein, dividends declared and unclaimed would be warehoused and owed as a perpetual debt to shareholders.

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Debt Securities

Chapel Hill Denham Nigeria infrastructure debt fund offers up to N20.2 billion

A leading Nigerian investment bank announced Chapel Hill Denham Nigeria Infrastructure Debt Fund Series 7 Offer of up to N20.24 Billion

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Crises also create opportunities” –Chapel Hill Denham’s CEO on COVID-19

Chapel Hill Denham Advisory Limited and Chapel Hill Denham Management Limited announced the opening of Chapel Hill Denham Nigeria Infrastructure Debt Fund Series 7 Offer of up to N20.24 billion under the CHD NIDF’s N200 billion Issuance Programme.

READ: NSIA to invest $5 million in Chapel Hill Infrastructure Fund

What you should know

The proceeds from the offer will be applied towards infrastructure loans approved by the fund manager’s investment committee.

  • It also disclosed that African Development Bank (AfDB), following its announcement in October 2018 to invest in the NIDF, will be committing the Naira equivalent of USD$10 million to the series 7 offer.
  • AfDB’s commitment to the NIDF was on the back of a detailed due diligence and review process undertaken by a multi-disciplinary team of AfDB experts.

READ: Top 10 Stockbroking firms trade shares worth N138.1 billion in January 

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In the current volatile yield environment, the NIDF still remains a compelling investment outlet, both from a total return and cash yield perspective.

With net assets in excess of N58.6 billion, the Fund continues to deliver consistent and predictable returns, along with principal preservation to investors.

What this means

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The cash yield generated by the CHD NIDF has consistently been above the 10-yr FGN. Since its inception in June 2017, the fund has delivered a total return of 82.3% (assuming the cash distributions were reinvested). Total returns for the trailing twelve months (up to September 2020) was 12.4%.

READ: Nigerian mutual funds made an estimated N1.9 billion gain in 2018

Highlights of the Chapel Hill Denham Nigeria Infrastructure Debt Fund include:

  • Entity: Chapel Hill Denham Nigeria Infrastructure Debt Fund
  • Fund Manager: Chapel Hill Denham Management Limited
  • Structure: Close-ended Unit Trust, regulated by the Nigerian Securities & Exchange Commission. Compliant with PENCOM Investment Guidelines and SEC Rules on Infrastructure Funds.
  • Program: ₦200 Billion under which the Units will be issued from time to time
  • Series: 7 Offer
  • Size: Up to ₦20.24 billion
  • Offer: Price ₦109. 58 per unit
  • Offer: Units 184,740,440 units
  • Minimum Subscription: 100,000 units
  • Offer: Open Date November 16, 2020
  • Offer: Close Date December 9, 2020
  • Listing: FMDQ-OTC

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