The Nation Newspaper

Tag: bonds

  • NSE reduces bonds’ fees to boost debt market

    NSE reduces bonds’ fees to boost debt market

    The Nigerian Stock Exchange (NSE) yesterday announced a revision of the listing and trading fees for securities listed and traded on its fixed income market. The revised fee structure will become effective on August 17, 2016.

    The new fee structure will run through a six-month pilot phase after which it will be evaluated to determine if it has met its objectives.

    Under the revised fee structure, NSE will no longer charge trading fees on fixed income traded on its platform. Also, the initial flat listing application fee of 0.15 per cent for all types of bonds has been replaced with variable listing application fees.

    With this, corporate bonds exclusively listed on the NSE, with existing equity listing, will attract 0.01 per cent listing application fee. Dual-listed corporate bonds with existing equity listing and other corporate bonds will attract 0.0375 per cent listing application fee while the listing application fees for State and Supranational Bonds has been reduced to 0.05 per cent.

    The Exchange also replaced the fixed brokerage commission of 0.0005 per cent with a negotiable rate capped at 1.0 per cent. This will enable investors to negotiate trading commission with brokerage firms.

    Executive Director, Capital Markets, Nigerian Stock Exchange (NSE), Mr. Haruna Jalo-Waziri, said the reduction in fee demonstrated Exchange’s commitment to boost market efficiency.

    “The reduction in listing application fees gives issuers opportunity to raise their profile and increase visibility through listing on a globally recognised Exchange with the highest regulatory standards. The aim is to reduce issuers cost of accessing long term capital and to provide investors with diverse investment products at competitive trading fees,” Jalo-Waziri said.

    He urged issuers to raise cheap long term capital through bond issuance for business expansion, project finance and loan refinancing, noting that Nigeria has huge investment opportunities.

    “NSE remains committed to building an enduring marketplace and will continue to pursue initiatives that add value to issuers and investors,” Jalo-Waziri said.

     

  • Interest rate cut: bonds, naira fall

    Interest rate cut: bonds, naira fall

    The naira and bond yields fell sharply yesterday while stocks rose a day after the Central Bank of Nigeria (CBN) has cut interest rate to stimulate lending in the economy.

    The CBN cut benchmark interest rate to 11 per cent from 13 per cent on Tuesday, its first reduction in the cost of borrowing in more than six years.

    The naira was quoted at 242 to the dollar on the unofficial market, down 0.8 per cent from 240 the previous day.

    The currency, which is pegged at  N197 to the greenback on the official interbank market, traded at 235 on the unofficial market on Monday.

    The stock market, which has the second-biggest weight after Kuwait on the MSCI frontier market index, erased seven days of losses to climb to 27,662 points, following the rate cut. The index has fallen to 20.4 per cent so far this year.

    “On the back of the reduction in policy rates, investors are reconsidering investment in the equities market to earn higher return,” said Ayodeji Ebo, head of research at Afrinvest, adding: “We anticipate further moderation in bond yields.”

    He expected stocks in the industrial sector such as Dangote Cement and Lafarge Africa to gain from the liquidity surge as infrastructure projects boom. Ebo said the rate cut may hurt bank earnings as consumer firms reel from dollar shortages.

    Yield on the most liquid five-year bond fell 264 basis points to a five-year low of 7 per cent while the benchmark 20-year bond closed 150 basis points down at 10.8 percent on Wednesday, traders said.

    Bond yields had traded above 11 per cent across maturities prior to Tuesday’s rate decision, with the 2034 bond trading at 12.30 per cent.

    The central bank has been injecting cash into the banking system since October in a bid to help the economy. Banking system credit stood at 290 billion naira ($1.5 bln) as of Wednesday, keeping overnight rates as low as 0.5 per cent.

  • African assets tumble as commodity slump hurts bonds, currencies

    African assets tumbled amid the global markets rout on concern China’s economy is slowing and as commodities fell to a 16-year low.

    Eight of the world’s 10 worst performing currencies as of 12:27 p.m. in London were African, with Zambia’s kwacha and South Africa’s rand falling to new lows against the dollar. Nigeria’s Eurobonds soared to record highs, while Ghana’s dollar yields rose above 10.5 percent for the first time since December.

    “It’s crazy right now,” Stephen Bailey-Smith, head of Africa strategy at Standard Bank Group Ltd., said by phone from London. “Everyone’s putting on a helmet and just hoping to get through the day. African Eurobonds have been hit harder than average because they’re perceived as being more commodity-dependent.”

    More than one quarter of sub-Saharan Africa’s exports go to China, according to data compiled by Bloomberg. Beijing’s devaluation of the yuan last week heightened concern that slowing growth will depress prices of commodities from oil to copper, with Brent crude falling below $45 a barrel for the first time since March 2009 on Monday.

    Zambia, which derives almost 70 percent of export earnings from copper, saw its currency drop as much as 4.6 percent to 8.58 per dollar before paring losses to trade 2.1 percent weaker at 8.38 by 1:10 p.m. in the capital, Lusaka, still a record low on a closing basis. Copper tumbled 2.4 percent to $4,935 per metric ton, the lowest since July 2009.

    The southern African nation’s government said it would be futile to try and stop the rout by selling dollars in the currency market.

    “You cannot intervene in a currency market or the speculators will take you to the cleaners,” Deputy Finance Minister Christopher Mvunga said by phone from Lusaka. “That’s suicidal if you do that.”

    Nigeria and Angola, Africa’s biggest oil producers, may be forced to abandon efforts to sustain their currencies amid the turmoil, according to London-based advisory firm Capital Economics Ltd.

    Forward prices for the naira widened even as the spot price, which has been mostly flat since the start of March amid central bank curbs on trading, was unchanged at 199.05 per dollar. Six-month non-deliverable forwards, which indicate traders’ expectations for the interbank price in that period, jumped 2.3 percent to 242 per dollar, the highest since March 27. One-month forwards surged 3.6 percent, the most since February 10, to 214.

    The Nigerian central bank’s spokesman, Ibrahim Mu’azu, didn’t answer Bloomberg’s calls to his mobile.

    “Falling commodity prices have dealt a heavy blow to many currencies in sub-Saharan Africa,” Capital Economics analysts including John Ashbourne said in a note. “This general weakness comes despite central bank efforts to support ailing currencies, which we doubt will be successful.”

    Yields on a $1 billion Eurobond due in August 2023 for Ghana, which exports gold and oil, climbed 32 basis points to 10.54 percent, the highest on a closing basis since December 16. Rates on Nigeria’s $500 million of debt due in July 2023 climbed 24 basis points to 8.26 percent, a record.

  • South African bonds attract foreign investors

    south African bonds are up against quickening inflation, rising interest rates and the prospect of a Federal Reserve rate increase. That’s not deterring offshore investors.

    South African rand debt attracted the largest inflows in July out of eight emerging markets including Russia, Turkey and Poland, according to data compiled by Bloomberg. Foreigners bought a net $600 million of the nation’s bonds in the month, the most since April, the data show.

    Benchmark yields have climbed 120 basis points since January, making them the fourth-highest among emerging-markets tracked by Bloomberg indexes. The sell-off pushed yields to a level where they compensate investors for the risk of a Fed rate increase, which would draw money to the dollar, as well as prompting a tightening by the South African Reserve Bank as inflation accelerates, according to Pioneer Investment Management Ltd.

    “We increased positions in the last three months,” Hakan Aksoy, a portfolio manager at Pioneer, which oversees $244 billion, said by phone from London. “If there’s another sell-off, we would like to increase duration risk” in South African debt, provided the Fed doesn’t exceed expectations for rate increases this year, he said.

    Economists project a 50 percent chance the Fed will start with interest rate increases at its September meeting, according to the median probability of 46 economists in a Bloomberg News survey. Almost half the economists said the policy rate, currently near-zero, will end the year in a range of 0.5 percent to 0.75 percent.

    South African bonds could benefit if the Fed proceeds more cautiously, said Aksoy, who favours maturities from five to 15 years. Fed policy makers said the labour market and housing have improved, moving closer to ending an unprecedented period of near-zero interest rates, without providing a clear signal on the timing.

    “We are expecting a relatively slower rate hike process from the Fed,” Aksoy said. In that case, “South Africa will benefit more than the other emerging-market countries” as the bonds have sold off more than most peers.

    Yields on benchmark securities due December 2026 climbed 2 basis points to 8.27 percent by 4 p.m in Johannesburg, the highest since July 7. The rand strengthened 0.7 percent to 12.6151 per dollar after slumping 1.3 percent on Thursday to a record low close.

     

  • Mortgage Refinance Company eyes N440b bonds issuance

    Nigeria’s state-backed mortgage-refinance company plans to sell N440 billion ($2.2 billion) of bonds as it seeks to expand access to housing funds, its chief executive officer said.

    The Nigeria Mortgage Refinance Company will start with the sale of N10 billion of debt this week, the first step in a quarterly programme to raise N140 billion, Charles Inyangete, the chief executive officer, told Bloomberg.

    That’s “part of a bigger programme” over a five-year period, he said. The 15-year bond will be used to refinance existing mortgages that meet specified underwriting requirements and will be listed on the Financial Market Dealers Association trading platform, Inyangete said, declining to give further price information.

    Nigeria seeks to expand access to housing finance to help cut a deficit of 17 million houses. It needs investment of N3.5 trillion to build 780,000 housing units annually to help meet rising demand, according to Inyangete.

    NMRC, as the company is also known, is rated BBB+ by the Johannesburg-based Global Credit Rating Co., which provides debt evaluation and ratings across Africa, while its proposed bond, now in the process of price discovery, is rated AAA, as it’s backed by a Nigerian government guarantee, he said.

    While the NMRC has been able to provide a uniform underwriting standard for the country’s mortgage market, the absence of a foreclosure law is hampering quicker expansion, Inyangete said.

    “We see a need for a legal structure that is clear and simple for the creation of mortgages,” he said. The NMRC is taking a “state-based approach” as it tries to push for passage of proposed mortgage and foreclosure legislation. This includes creating mortgage boards for the respective states to simplify the process.

    The government-controlled mortgage company plans to sell shares to the public before the end of the year to dilute its ownership, according to the chief executive officer. “Our ideal scenario is to have every bank that is interested in providing mortgage financing to be part of it,” he said.

     

  • DMO sells N60b bonds, yields dip across all tenors

    DMO sells N60b bonds, yields dip across all tenors

    The Debt Management Office (DMO) sold bonds worth  N60 billion at lower yields on all tenors at an auction on Wednesday, the debt office said yesterday.

    In a statement, it said investors submitted total bids of N183.34 billion compared with N184.72 billion at the last auction.

    The lower yields reflected the trend in the secondary market, which remained at below 14 percent following a sharp rise immediately after the peaceful elections in March. The five-year, 10-year and 20-year tenors each received a total of N20 billion, DMO said.

    The five-year paper was sold at 13.84 per cent, lower than 14.44 per cent it during last month’s auction. The 10-year bond fetched a yield of 13.48 per cent against 14.22 per cent last month, while the 20-year debt attracted a yield of 13.88 per cent compared with 14.45 per cent last month.

    Meanwhile, the economy grew by 3.96 per cent in the first quarter of this year, a sharp slowdown from the same period last year due to the fall in oil prices, the Nigerian Bureau of Statistics (NBS) said yesterday.

    NBS said oil production was 2.18 million barrels per day in the first quarter of the year, unchanged from the previous quarter but lower than 2.24 million barrels recorded in first quarter of last year.

    Expansion in gross domestic product (GDP) eased on an annual basis to four per cent compared with 5.9 per cent a quarter earlier, the NBS said.

    The oil sector shrunk 8.2 per cent after a contraction of 6.6 per cent in the fourth quarter even as production was almost unchanged at 2.18 million barrels per day, NBS said.

    “Rising inflation will put pressure on consumers’ purchasing power and could well prompt monetary tightening. Meanwhile, the cash-strapped government is not really in a position to attempt to boost economic growth,”  analyst Cobus de Hart at NKC Independent Economists in Paarl, South Africa, said in e-mailed comments.

    Early this month,  the government had borrowed more than half the amount it budgeted for the full year as it contends with “cash-flow crunch,” Finance Minister Ngozi Okonjo-Iweala said. The Central Bank of Nigeria (CBN) left its key lending rate unchanged at 13 per cent in March.

    The oil industry represented 10.5 per cent of the country’s first-quarter GDP, rising from nine per cent in the three months through December, the statistics agency said. Non-oil growth was 5.6 per cent in the first quarter, compared with 6.4 percent in the fourth quarter of last year. The level of unemployment was at 25.1 per cent last year, according to revised data from the agency.

  • SEC cancels ‘black market’ for shares, bonds

    SEC cancels ‘black market’ for shares, bonds

    Nigeria’s capital mar-ket regulator, the Se-curities and Exchange Commission (SEC), has proscribed underhand trading in the shares and other securities of unlisted public limited liability companies.

    A document on new rules and regulations approved by SEC obtained at the weekend indicated that there shall be no trading on shares, bonds and other securities of unlisted public limited liability companies outside the platform of a registered securities exchange established and registered by SEC for the purpose of facilitating over-the-counter (OTC) trading of securities.

    The new rules and regulations will have the force of law as they were made pursuant to section 313, subsection one of the Investments and Securities Act (ISA) 2007, which empowers the Commission to, from time to time, make rules and regulations for the purpose of giving effect to the Act as well as amend and revoke rules and regulations so made. ISA is the main body of law for the capital market.

    According to the new rules, all securities of unlisted public companies shall be bought, sold or transferred only by means of a system approved by the Commission and under such terms and conditions as the Commission may prescribe from time to time.

    “No person shall buy, sell or otherwise transfer securities of an unlisted public company except through the platform of a registered securities exchange established for the purpose of facilitating over-the-counter trading of securities,” the rules stated.

    Any unlisted public company, director, company secretary, registrar, broker, dealer or such other persons who facilitate the buying, selling or transfers of the securities of an unlisted public company other than through the platform of a duly registered securities exchange, shall be liable to a penalty of not less than N100, 000 in the first instance and not more than N5, 000 for every day of default.

    The Commission stated that the aim of the new rules and regulations is to ensure that all securities of unlisted public companies are traded within securities exchanges that are registered with the Commission.

    The new rule effectively cancels ‘black market’ trading on the shares of several unlisted Plcs including companies such as Fan Milk Plc and Cappa & D’Alberto Plc among others.

    The Nation had earlier exclusively reported that SEC was considering proscribing unregulated trading in shares of public limited liability companies.

    The new rules now effectively concentrates trading on the shares and other securities of unlisted Plcs on the only registered OTC platform, the National Association of Securities Dealers (NASD)  Plc.

    NASD is a registered OTC trading platform for unquoted securities including equities and bonds. Owned by several investment and financial institutions as well as strategic investors, it is registered by SEC as an organised trading platform for unlisted securities.

    NASD started trading on unlisted securities in July 2013. All investment instruments approved by SEC could be traded on the NASD including shares of unlisted multinational companies. After the initial formative period, the NASD plans to trade on commercial papers and then other complex instruments like derivatives and options.

    As an OTC market, NASD does not have a trading floor like the traditional exchange but trades through the internet and a hosted platform leased from the NSE. To facilitate its trading, the company had developed an integrated market system made up of the Central Securities Clearing System (CSCS), six settlement banks and some registrars to ensure smooth operations.

     

     

  • DMO raises N91b in bonds at higher yields

    DMO raises N91b in bonds at higher yields

    The Debt Management Office (DMO) raised N91 billion at a bond auction held yesterday with yields rising by more than one percentage point across all tenors, it announced yesterday.

    The debt office explained that a total of N20 billion worth of the five-year bond was sold at 16.49 per cent, up 95 basis points from 15.54 per cent from the previous sale on February 11, it said.

    The 10-year paper was sold at 16.84 per cent compared with 15.75 per cent previously, raising a total of N40 billion, while N31 billion worth of the 20-year debt note was sold at a yield of 19.99 per cent, up from 15.85 per cent previously.

    Dealers said that the sale attracted low demand from investors. Total subscriptions stood at N119.14 billion compared with N123.6 billion at the last auction.

    The DMO had issued its provisional issuance calendar for the fourth quarter which showed that the agency will raise between N195 billion and N285 billion from the sale of Federal Government of Nigeria bonds over the quarter.

    The DMO raised N300 billion from its auctions in third quarter of last year, which, FBN Capital said, as a statement of pre-election caution.

  • Fed Govt offers new bonds amidst dwindling demand

    Fed Govt offers new bonds amidst dwindling demand

    The Federal Government will today launch the first tranches of its bond issues for this quarter, as the government seeks to raise some N305 billion over the next three months.
    The Debt Management Office (DMO), the Federal Government agency that manages sovereign debt issues, is scheduled to offer three tranches of bonds today, according to an issuance schedule made available to market operators.
    The bond issues, which are re-opening of previous issuance, are expected to raise about N73 billion, about a quarter of government’s target for the quarter. The bonds to be offered at today’s auction included the N24 billion 15.10 per cent FGN April 2017 bond, the N25 billion 14.20 per cent FGN March 2024 bond and N24 billion 12.1493 per cent FGN July 2034 bond.
    In order to encourage retail investors and broaden investors’ participation, the bonds will be offered with a minimum subscription of N10, 000 and in multiples of N1, 000 thereafter. A unit costs N1, 000.
    While the issuance today consists entirely of re-opening, DMO is expected to launch a new five-year instrument sometimes in February.
    The new bond issues come amidst notable decline in demand for sovereign bonds. Analysts at FBN Capital noted that demand for government bonds had fallen below supply in the previous quarter.
    The DMO had raised N182 billion in the fourth quarter of 2014 as against its targets of between N195 billion and N285 billion.
    “It has a new challenge in that investor fatigue for auction participation has emerged,” FBN Capital stated in a review of this quarter issuance progamme.
    According to analysts, DMO has the unenviable task of rolling out bond issuance calendar when there is no approved 2015 budget and there may not be any one until after the February elections.
    Analysts attributed the slowdown in demand for sovereign bonds to attractive rates on money market instruments as well as tight monetary policy and macroeconomic worries due to pressure on crude oil price and Naira.
    There are expectations that the Federal Government may overshoot its proposed budget deficit of N722 billion in 2015, raising the possibility of larger bond issuance.
    Analysts at Afrinvest Securities Limited said the current macroeconomic scenario suggests possibility of a higher deficit than anticipated in 2015 citing the declining crude oil price and the vulnerability of the non-oil revenue mobilization.
    According to analysts, with a new floor yet to be established, there is the possibility of crude oil prices declining, which will undermine Nigeria’s budget benchmark and pose major challenge to budget performance during the year.
    Analysts noted that in the scenario that oil prices do not recover to a minimum of $65 in 2015, Nigeria’s budget benchmark price, government may incur larger deficits than the previously estimated sum of N755 billion.
    The 2015 Budget indicates net federally collectible revenue of N6.9 trillion, with a total of N3.6 trillion envisaged to fund the FGN 2015 Budget, representing about 3.4 per cent drop from N3.7 trillion for 2014 Budget. Details of aggregate budget revenue of N3.602 trillion included oil revenue of N1.92 trillion and non-oil revenues of N1.68 trillion. This represented a ratio of 53 percent oil revenues to 47 percent non-oil revenue.

     

     

  • N976b AMCON bonds: Holders want 30% proceeds in cash

    N976b AMCON bonds: Holders want 30% proceeds in cash

    Holders of the Asset Management Corporation of Nigeria (AMCON) Series V N976 billion Zero-Coupon Bonds due last month opted to take about 30 per cent of redemption proceeds in cash, a report by the FBN Research, an investment and research firm, has indicated.

    It said the holders’ choice of repayment has created an additional liquidity overhang since the maturity of bonds on October 31.

    “There has been an additional liquidity overhang since the maturity of Asset Management Corporation of Nigeria (AMCON) bonds, totaling close to N900 billion on  October 31. The holders opted to take about 30 per cent of the redemption proceeds in cash,” the report said.

    AMCON had last December redeemed its issued Series I, II, III and IV Bonds. The bad debt lender has  fully retired over N1.8 trillion of all bonds issued since inception.

    AMCON’s Head, Strategy & Communication, Kayode Lambo, said the step put it ahead of its planned redemption schedule, as all its publicly held bonds have been redeemed before the end of its fourth full year of operations.

    The  Corporation had issued zero coupon bonds with a face value of N5.67 trillion as Series I, II, III, IV and V, between December 2010 and December 2011.

    The Series V redemption was financed utilising AMCON’s internally generated cash flows and the Banking Sector Resolution Trust Fund (the Sinking Fund).

    Lambo said the Sinking Fund is funded by the yearly contributions from the Nigerian Deposit Money Banks and the Central Bank of Nigeria (CBN), adding that the collaboration and support of the apex bank was critical to the success of the process.

    AMCON’s Executive Director, Finance & Corporate Services/CFO, Mrs. Mofoluke B. Dosumu, said: “The Redemption represents a major milestone in the reduction of AMCON’s obligations, as it signifies the retirement of all AMCON bonds held by the public markets.

    “We will continue to make good progress with respect to our obligations to the Central Bank of Nigeria, presently the sole holder of AMCON’s outstanding debt obligations.”