It was a quiet trading session in the bond market, yesterday, with slight demand seen on select maturities (2023, 2028 and 2030). Coupon payments on the FGN 2024 Sukuk and FGN 2025 Bond stimulated marginal buying interest causing benchmark bond yields to slip marginally by c.2bps on the day.
The yield on the 2023 Bond (4.09 TTM) was down by 12bps to 14.46% on the day while the yield on the 2028 Bond (8.92 TTM) slipped by 8bps to settle at 14.31%. Though not a benchmark bond, The 7.00% 23-Oct-2019 Bond created the most value with trades worth N68 billion. However, the yield on the bond advanced by 3bps on the day indicative of some sell pressure on the bond.
Investors in the T-bills market were a little more bullish than Bond market investors as yields on the benchmark bills compressed by c.15bps in yesterday’s trading session. Investor demand was concentrated at the intermediate to long end of the curve (above 190 DTM). The 6th-February bill recorded the highest daily change as its yield dropped by 59bps to settle at 14.28% in trades worth N6 billion.
Similarly, the yields on the 14th-November and 5th-December bills fell by 15bps and 25bps apiece to settle at 14.29% and 14.37% respectively.
In the money market, both the Overnight (OVN) and Open Buy Back (OBB) rates advanced by no less than 800bps each to 24.43% and 22.43% respectively. Speculation around the scheduled debit on banks by the Central Bank (CBN) for premium payments to the Nigerian Deposit Insurance Corporation (NDIC), in addition to funding provisions made for the US$210 million FX wholesale auction conducted by the CBN depleted the liquidity in the interbank market and fuelled a rise in the money market rates.
System liquidity at market open was considerably lower at c.N34 billion relative to an opening liquidity position of c.N175 billion in the previous trading session.
At the official market, the naira lost some steam and depreciated by 0.02% to settle at N306.95/$. However, at the I & E window the naira appreciated marginally (0.01%) as there was a handful of sellers and no major dollar buyers. Offers ranged betweenN357.0/$-N361.5/$ and the naira exchange rate finally settled at N360.39/$ (Previous: N360.43/$).
The bulk of the trades settled between N360-N362/$, however a few trades were consummated at N359/$ levels. Turnover in the I & E window was estimated at US$225 billion, c.3% lower than a turnover of US$231 million in the previous session. Month-to-date, dollar inflows to the tune of US$5 billion have been facilitated through the window and 76% of the inflows originate from internationals as foreign portfolio inflows (FPIs).
Outlook for today
Today, investors in the fixed income market expect the MPC to hold monetary policy tools at current levels. Therefore, we do not anticipate a volatile trading session on the back of a “status quo” decision by the MPC.
Bond market investors are likely to engage in cautious trading ahead of the bond auction on Wednesday while we expect demand interest for t-bills to be constrained by tight system liquidity levels. In the currencies market, we expect the naira to remain firm against other major currencies.
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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.
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).
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.
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).
Offer Open Date: Thursday, May 28, 2020.
Offer Close Date: Thursday, June 4, 2020.
Settlement Date: Friday, June 5, 2020.
Minimum subscription: N1 million.
Issuance size: N100 billion (series 1 & 2 commercial paper issuance N50billion each).
Issuer Rating: Aa+ (Augusto); AA (GCR).
Tax consideration: Free and clear of withholding Taxes.
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.
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.
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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.
United Capital Plc raises N10billion in Series 1 Bond Issuance
The bond issuance adds to itsbimpressive portfolio of innovative and landmark transactions it has structured, and it once again highlights its capabilities in the successful execution of novel debt capital market transactions.
United Capital Plc, has raised N10 billion in its Series 1 Bond issuance under a N50 billion Medium-Term Debt Programme registered with the Securities & Exchange Commission (SEC).
The capital raise places the company as the first Issuing House to issue a Corporate Bond in the history of the Nigerian Capital market.
The company’s Group CEO, Peter Ashade, explained that this action, being a first for any investment bank in the history of the Nigerian Capital market, strengthens United Capital’s track record as a force to reckon with in the investment banking terrain.
He said, “With an oversubscription of 24% investor, we believe this milestone accentuates the confidence in our Institution, and its ability to diversify our corporate funding sources, provide innovative financial solutions and our unwavering commitment to our esteemed clients.”
In line with the company’s goals for the year 2020, it served as a book runner on the deal, advising on the transaction structure, securing relevant regulatory approvals, and implementing a marketing strategy for the bonds. Its role also included making a compelling business case for the issuance, amongst others.
Babatunde Obaniyi, Managing Director, Investment Banking, said, “the bond issuance adds to the impressive portfolio of innovative and landmark transactions we have structured, and it once again highlights our capabilities in the successful execution of novel debt capital market transactions.”
The transaction having a tenor of 5 years, scored a 124% subscription, “with huge commitments from a diversified institutional investors’ base including Pension Fund Administrators and other players in the financial service space.”
He also explained how the strong outcome of the transaction re-affirms the confidence of its buy-side investors’ as well as its leadership in the financial services landscape.
Here’s what should be expected in Nigeria’s fixed income market this week
“Going into next week, there is an OMO maturity coming in. So, that will help to ensure balance.”
The Nigerian fixed income market is expected to witness a moderate activity as well as moderate liquidity during the new week. This is according to Nkem Azinge, a Currency Trader at UBA who spoke to CNBC Africa.
According to her, the market is expected to witness an OMO maturity during the week which, by the way, is going to be a short trading week due to public holidays on Monday and Tuesday. The OMO maturity will help maintain balance, even as liquidity in the system will just be moderate.
“Going into next week, there is an OMO maturity coming in. So, that will help to ensure balance. It is a short trading week. So, liquidity will just be moderate,” she said.
Earlier on during the interview, Azinge explained why there was also relative activity in the fixed income last week. According to her, the OMO market witnessed “buying activity as offshore players looked to deploy idle cash. We also saw banks buy as the market opened liquid.”
However, the trend reversed by Thursday because investors took advantage of lower yield in the market to “take profit in anticipation of the PRR debit that was expected” and CBN’s FX auction.
On the other hand, the bond market witnessed mixed sentiments last week. This is because while a number of people took profit on their auction, others sold off in anticipation of a possible increase in supply.
In the FX market, the CBN re-opened its whole bill auction by pumping as much as $72 million into the market. This helped to ensure liquidity in the market.
Azinge noted that it had been more than two months since such an auction occurred, a situation that led to very limited supply in the FX market. Therefore, the auction was a welcome development even as it indicated that the apex bank is now ready to meet growing dollar demands by Nigerians.
Note that the CBN’s Monetary Policy Committee (MPC) meeting is slated to take place on Thursday. This is also expected to influence activities in the fixed income market during the new week.
Watch Azinge’s entire interview with CNBC Africa by clicking here.