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Fixed Income

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

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Financial statements

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

  • Investors look to Secondary Market to fill unmet demand at previous day’s auction
  • CBN conducts Special OMO Auction to mop up OMO maturities

KEY INDICATORS

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Bonds

The FGN Bond market reacted positively to the low volumes sold at the previous day’s Bond auction. Yields compressed by c.11bps on the average across the Bond curve, as participants adjusted to accommodate the expected demand. We witnessed demand at the mid-end of the curve, especially the 2027s and 2028s maturities, which saw yields compress by c.18bps in that space.

We expect the bullish sentiments to remain short-lived as investor demand at current yield levels remains weak. Deteriorating economic indicators (e.g. unemployment) as well as weak outlook for global oil prices continue to support our bearish outlook for bonds for the rest of the year.

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Treasury Bills

The T-bills market saw some reprieve as NTB & OMO maturities of N497.81bn hit the system. Yields across the mid- to long-end of the Benchmark NTB curve compressed by c.8bps on the average following slight investor demand on those maturities. The short-end however remained bearish, with yields expanding by c.23bps on the average at the end of the NTB curve.
The CBN consequently rolled over c.95% of the total amount of maturing OMO bills at today’s OMO auction, maintaining rates across the tenors on offer. The CBN sold a total of c.N471.24 across the three maturities on offer, including special OMO sales of N195.50bn.
We expect yields to remain elevated to close the week as market liquidity shrinks from expected outflows.

Money Market

Money Market rates closed lower on the day, despite liquidity mop up by the CBN via the sale of OMO securities (c.N471.24bn). Open Buy-Back (OBB) and overnight (O/N) dropped to 13.58% (from 21.71%) and 14.83% (from 23.07%) respectively due to OMO maturities of c.N497.81bn. Consequently, System Liquidity is estimated to close in a negative territory of c.N52bn.
We expect rates to close the week higher as market participants provide funding for FX Retail interventions by the CBN.

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate in the I&E window appreciated marginally by c.0.10% to N364.57/$ from N364.93/$ previously. Value traded at the I&E FX window increased by c.21% day-on-day, with a total trade turnover of $319.96mm traded in 468 deals, with rates ranging between N362.50/$ – N367.00/$.

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At the parallel market, the cash and transfer rates appreciated by c.0.27% to close at N364.00/$ and N367.00/$ respectively.

Patricia

Eurobonds

The NGERIA Sovereigns continued its bearish run, with yields ticking further higher by c.4bps on the average across the curve, in light of pressures from lower global oil prices and a rate hike by the US FOMC yesterday.

It was a quiet trading session on the day for the NGERIA Corps, especially on the Diambk 19s as further details emerge of the proposed merger of Access and Diamond Banks. Sellers remained on the ACCESS 21s Subs, as yields on that paper expanded further by c.7bps from the previous close.


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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Fixed Income

Official: Nigerian Treasury bills calendar for Q3 2020

Official: Nigerian Treasury bills calendar for June – August 2020

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Treasury, bills, calendar, Central Bank

The Central Bank of Nigeria (CBN) Published its Treasury Bills program for June to August 2020, indicating that it plans to raise about ₦821.8 billion in cash.

Check out: CBN says commercial banks can invest in Treasury Bills for now(Opens in a new browser tab)

The Central Bank sells treasury bills on a bi-weekly basis to investors and is one of the safest investments available. Interests are paid upfront and the principal paid in full upon maturity.

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Learn to invest in treasury bills here

3rd quarter of 2020

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READ ALSO: Manufacturing PMI slide into recession territory

2nd quarter of 2020

READ ALSO: $14 billion Dangote Refinery: uncertainty surrounds take-off

1st quarter of 2020

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Patricia

READ MORE: UPDATED: Nigeria received $5.85 billion capital inflows in Q1 2020 –NBS

4th quarter of 2019

Treasury bills calendar, Treasury, bills, calendar, CBN

Calculate Treasury Bill

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Coronavirus

How COVID-19 and low yield affect Nigeria’s pension funds

Covid-19 and low yield are conniving to rub pension fund managers of a chest-beating performance, and the pension fund investors of blissful retirement.

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How COVID-19 and Low Yield Affect Nigeria’s Pension Funds, How COVID-19 and Low Yield Affect Nigeria’s Pension Funds

Towards the end of 2019 it became evident, judging by the way interest rates were going, that pension fund managers might find it difficult to replicate prior years’ performances.

It even became more evident, when viewed against the realization that most of the assets under management by pension fund managers in Nigeria are invested in financial instruments that derive their benefits or even existence from the yield curve.

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As if that was not enough challenge, and to add insult to injury, out of nowhere and without any notice, came coronavirus. Today, those two, Covid-19 and low yield are conniving to rub pension fund managers of a chest-beating performance and the pension fund investors of their hope for a long-lasting and blissful retirement.

Already, the impacts of those two are being felt by pension funds, not only in Nigeria but the world over. My pension fund account is yet to recover from the 18% drop it suffered in March 2020.  Although Nigerian pension funds recorded positive returns during the first 4 months of the year, such returns are nothing to write home about, when compared to prior years’ returns.

According to an analysis conducted by Quantitative Financial Analytics, the RSA category of Nigerian pension funds generated an average of 1.64% on a year to date basis, as at April 30th, 2020, while the Retiree fund category generated an average return of 2.96%. Compared to a similar period in 2019, RSA funds generated an average return of 3.46% while the Retire fund category had an average of 4.13%. For the year to date, April 30th, 2020, Pension fund manager, Veritas Glanvills (VG) recorded the highest return in both categories of 4.24% and 5.38% respectively and a couple of funds made losses.

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READ MORE: Nigerian Pension Funds Continue to Gather Positive performance, though in Trickles

The grass is not greener on the other side

Although those numbers are not what pension fund investors expected or hoped for, they are quite impressive when compared with what is happening elsewhere in the World. According to the Financial Times Adviser (FT Adviser), “the average pension fund fell by 15% in the first quarter of this year” in the UK, which represents “the worst quarterly performance on record”. In the United States of America, the story is the same. According to the Washington Post which described COVID-19 pandemic as a meltdown, “This meltdown has exposed the fragility of public pension systems in the United States”. In the wake of the pandemic, “Moody’s Investors Service estimated that the stock market sell-off vaporized $1 trillion of value from public pension portfolios or about 21 percent of the assets that pay for the retirement plans of state and local employees”.

In another reportorial, the NJ Spotlight, (a New Jersey Newsletter in the US), noted on March 26th, 2020, that Covid-19 hammered public pension workers to the extent that the pension system shed $6 billion since January 1st. S&P Ratings also estimated that, in the first quarter of 2020, “U.S. public pension funds in aggregate lost a cool $855 billion”.

Those underscore the bleak future facing pension fund industries all over the World and the need for Nigerian pension fund investors to be thankful with the 1% average gain that Nigerian pension fund managers were able to generate.  It is hoped that as the fight to curb or eradicate Covid-19 rages on successfully, that the performance will improve rather than get eroded.

(READ MORE: Analysis: Your pension fund is worth less)

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Pension funds,How COVID-19 and Low Yield Affect Nigeria’s Pension Funds

Pension funds

Patricia

With that said, here are the 5 best pension fund performers in Nigeria as at April 30th 2020:

Retirement Savings Account, RSA, category:

Best Performing Fund: 

Name of Fund: Veritas Glanvills Pensions RSA Pension Fund 2

YTD Performance %:  4.24%

YTD Gain per unit:  N0.13

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READ ALSO: Sukuk is ‘new love’ for Pension funds as total asset value hit N7.9 trillion

Second Best Performing Fund: 

Name of Fund: AIICO Pensions RSA fund 2

YTD Performance %:  3.75%

YTD Gain per unit:  N0.14

3rd Best Performing Fund: 

Name of Fund: OAK Pensions RSA Fund 2

YTD Performance %:  3.31%

YTD Gain per unit:  N0.10

4th Best Performing Fund: 

Name of Fund: Premium Pensions RSA Fund 2

YTD Performance %:  2.89%

YTD Gain per unit:  N0.14

5th Best Performing Fund: 

Name of Fund: Anchor Pensions RSA Fund 2

YTD Performance %:  2.69%

YTD Gain per unit:  N0.07

(READ MORE:Is the pension asset just another cookie jar?)

PENCOM, Pension Funds, Analysis: Your pension fund is worth less, PenCom dissolves interim management committee for First Guarantee Pension, appoints new board, How COVID-19 and Low Yield Affect Nigeria’s Pension Funds

Retirement Savings Account, RSA, category

Best Performing Fund: 

Name of Fund:  Veritas Glanvills Pension Retiree Fund 4

YTD Performance %:  5.38%

YTD Gain per unit:  N0.19

Second Best Performing Fund: 

Name of Fund: Radix Pensions Retiree fund 4

YTD Performance %:  5.17%

YTD Gain per unit:  N0.11

3rd Best Performing Fund: 

Name of Fund: Fidelity Pensions Retiree Fund 4

YTD Performance %:  4.27%

YTD Gain per unit:  N0.14

4th Best Performing Fund: 

Name of Fund: ARM Pensions Retiree Fund 4

YTD Performance %:  4.21%

YTD Gain per unit:  N0.16

5th Best Performing Fund: 

Name of Fund: OAK Pensions Retiree Fund 4

YTD Performance %:  3.94%

YTD Gain per unit:  N0.15


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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FEATURED

Pension Fund Managers dump Nigerian Treasury Bills

Pension fund managers redeemed treasury bills worth N512 million Naira in the two months combined but did not invest any additional kobo into treasury bills within the same period.

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Pension funds, Treasury Bill Investment: Ghana Vs Nigeria, Further rate decline expected as N405 billion worth of treasury bills mature , CBN’s N225.45 billion T-bills auction records oversubscription, as rate fall below 5% , Nigeria’s 364-day treasury bills falls to 3.84% per annum

Analysis of the recently released summary of Pension Fund Asset data for the first two months of 2020 by the Pension Commission of Nigeria has shown that pension fund managers are no longer in love with Treasury Bills like they used to be in the past.

Time was when fund managers allocated much of their assets to treasury bills, but that seems to be waning as yields on treasury bills head towards subzero.

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According to the analysis, pension fund managers redeemed treasury bills worth N512 million in the two months combined but did not invest any additional kobo into treasury bills within the same period.

READ ALSO: Nigeria’s pension contributors add N186.43 billion to pension asset

Prior to this event, the pension fund had invested a combined sum of N1.88 trillion into treasury bills, representing 18.4% of total pension fund assets.

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With that development, pension fund managers allocation to treasury bills now stands at 13%. This is about the first time, in over 5 years that PFM’s are shying away from treasury bills.

The love seems to have shifted to bank placements which attracted additional investment if N420 million from pension fund managers. FGN Bonds continue their camaraderie with pension fund managers as they pumped additional N352 million into FGN bonds in January and February, combined. This seeming reallocation to bank placements is indicative of pension fund managers’ desire to hold on to their cash, while waiting and hoping that yields will trend up anytime soon.

READ MORE: Pension fund multi fund structure performance

Yield Analysis: Fund managers who are out to seek ways to generate positive alpha or returns for their investors are running away because of the low treasury bill yields. The last Treasury Bill option that was conducted on May 13th, 2020, had stop rates of 2.5%, 2.85% and 3.84% for 91-day, 182-day and 364-day treasury bills respectively. Those rates were not enticing enough for the fund managers.

Strong Market Demand: This does not mean that Nigerian Treasury Bills are no longer in demand because, according to the NTB Auction Results sheet of May 13th, 2020, all the three tenors of treasury bills were oversubscribed.

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While the 91-day Treasury Bill had N4,384,80,000 on offer, it attracted a total subscription of N22,334,588,000, the 182-day tenor which had N12,920,900,000 on offer saw N41,194,993,000 being subscribed for, while investors bid N102,030,671,000 for the 364-day tenor which had N16,536,720,000 on offer.

Patricia

READ ALSO: Pension contributions from Nigerians under 30 dwindling at an alarming rate

Pension Fund Asset Allocation: All said and done, FGN bonds continue to be the asset type with the highest allocation from pension managers. Out of the N10.5 trillion total pension fund asset value as at February, 29th 2020, N5.6 trillion sits with FGN Bonds, while bank placements come second with an allocation of N1.48 trillion leaving Treasury Bills in the third position with an asset allocation of N1.37 trillion.

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