Connect with us
nairametrics
UBA ads

Fixed Income

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.

Published

on

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.

Markets Close on a Quiet Note as Tight System Liquidity pushes Funding rates Higher

UBA ADS

KEY INDICATORS

Bonds

The FGN Bond market traded on a quiet note to end the week with little volumes going in throughout the trading session. Investor sentiment weakened towards bond securities at current market yields. Consequently yields increased by a paltry single basis point across the curve to close the week.

We anticipate a very quiet FGN bond market going into next week, with further weakening of the yield curve expected as the demand flattens and some end-of-year profit taking trades expected.

GTBank 728 x 90

Treasury Bills

The T-bills market closed out the week on a bearish note, as tighter system liquidity pressured yields on the NTB curve. Yields ticked higher by c.9bps on the average across the NTB curve, despite the lack of an OMO auction offer by the CBN on the day.
In the coming week, the CBN will likely resume its daily OMO Auction offering to manage expected inflows from FAAC payments and OMO maturities. Due to the holidays and reduced trading sessions, we expect the CBN to be aggressive in the volumes on offer as it keeps a tight lid on system liquidity.

Money Market

Money Market rates jumped higher by c.900bps as system liquidity tightened further on the back of outflows for the FX retail intervention by the CBN and Bond auction settlement. Open Buy-Back (OBB) and overnight (O/N) increased to 21.67% (from 13.58%) and 25.08% (from 14.83%), with System Liquidity estimated to close in a negative territory of c.N110bn.
We expect rates to open significantly higher in the coming week, as market participants provide funding for FX Wholesale interventions by the CBN. High funding rates should be short-lived due to inflows from November FAAC payments as well as OMO Maturities (N.588.89bn) expected later in the week. The CBN is also expected to aggressively mop up the excess liquidity, resuming its daily OMO auction offerings.

app

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.0.01% to close the week at N364.54/$ from N364.57/$ previously. Value traded at the I&E FX window increased by c.35.15% day-on-day, with a total trade turnover of $432.44mm traded in 514 deals, with rates ranging between N338.00/$ – N366.00/$.

Patricia

Seasonal supply support the continued appreciation of the Naira at the parallel market. The cash rate appreciated further by c.0.33% to close at N362.80/$, while the transfer rate remained unchanged at N367.00/$.

Eurobonds

The NGERIA Sovereigns witnessed a quiet trading session, however with lower valuations as global oil prices continue to decline. Yields ticked higher further by c.3bps on the average across the curve.

Similarly, the NGERIA Corps saw little interest in the last trading session for the week, with no change recorded on the prices of the tracked tickers.

app

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.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

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.

Published

on

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.

UBA ADS

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.

GTBank 728 x 90

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)

app
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

app

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.

Continue Reading

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.

Published

on

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.

UBA ADS

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.

GTBank 728 x 90

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.

app

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.

Continue Reading

Fixed Income

MTN Nigeria begins N100 billion commercial paper issuance today

MTN Nigeria Communications Plc proposed Commercial Paper Issuance Offer begins today and is scheduled to close on Thursday, June 4, 2020. 

Published

on

MTN Nigeria, MTN Nigeria Communications Plc. begins N100 billion commercial paper issuance today

MTN Nigeria Communications Plc has commenced its Commercial Paper (CP) Issuance (Series 1 & 2 of N50 billion each)  under its N100 billion CP issuance programme on Thursday.

In a statement issued by the company and seen by Nairametrics, the telco explained that the issuance has a tenor of 180 days (CP 1) and 270 days (CP 2) with a discount rate of 4.6890% – 4.8797% (CP1)  and 5.8500% – 6.000% (CP2).

UBA ADS

Nairametrics had reported a few days ago when the telecommunication company notified the Nigerian Stock Exchange about the issuance.

Why it matters: The issuance is important to the telco, as it intends using the proceeds to its working capital and general corporate purposes in Nigeria. This issuance under the CP Programme represents MTN Nigeria’s debut in the domestic debt capital market.

READ ALSO: Bond: Lagos to raise N100 billion for infrastructural development

GTBank 728 x 90

Details: Issuer;  MTN Nigeria Communications Plc.

Arranger: Chapel Hill Denham Advisory Limited.

Tenor: 180 days (commercial paper 1)     270days (commercial paper 2).

Discount Rate: 4.6890% – 4.8797% (commercial paper 1)    5.6078% – 5.7455% (commercial paper 2).

Implied Yield: 4.8000% – 5.0000% (commercial paper 1)   5.8500% – 6.0000% (commercial paper 2).

app

Offer Open Date: Thursday, May 28, 2020.

Patricia

Offer Close Date: Thursday, June 4, 2020.

READ MORE: Nigerian Breweries set to raise N15bn through CP issuance

Settlement Date: Friday, June 5, 2020.

Minimum subscription: N1 million.

Issuance size: N100 billion (series 1 & 2 commercial paper issuance N50billion each).

app

Issuer Rating: Aa+ (Augusto); AA (GCR).

Tax consideration: Free and clear of withholding Taxes.

(READ MORE: Economy: Local corporates taking advantage of the low yield environment  )

MTNN is the leading telecommunications operator in the largest telecoms market in Africa. The company is the largest mobile operator and undisputed market leader in Nigeria, as measured by total mobile subscribers (c. 70 million), active data users (c. 26.8 million), revenue (almost 50% of industry), and profit pool.

MTN, MTN Nigeria Communications Plc. begins N100 billion commercial paper issuance today

MTNN is well-positioned for the long term, with its unmatched investments in its infrastructure – most expansive 2G, 3G, and 4G network, largest fibre network (c. 29,000km) that spans across Nigeria, largest physical and digital distribution platform, and wide range of spectrum holdings – and the exciting market opportunity Nigeria brings.

Get the Nairametrics News App

MTNN is rated Aa+ by Agusto & Co. which reflects the company’s history of strong financial performance – record revenue in excess of N1 trillion (largest revs by a listed corporate), stable and healthy operating profit metrics (+53% EBITDA margin), comfortably low leverage (0.4x Net Debt/EBITDA, 10.8x interest coverage) that is predominantly local currency, and strong free cash flow.

Continue Reading