Bearish Momentum Sustained As Average T-Bills Yield Advances 23bps WoW To 13.6%

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Monday, September 23, 2019 / 12:32PM / By Afrinvest ResearchHeader Image Credit: Sun Nigeria

 

The Treasury Bills ("T-Bills") secondary market sustained its bearish run last week, as investors continue to exit their positions to participate in the Primary Market and Open Market Operation ("OMO") offerings. Thus, average yield across all tenors advanced 23 bps W-o-W to settle at 13.6%. The short-, medium, and long-term bills witnessed sell pressures, advancing 7bps, 15bpd and 12bps respectively.

 

In last week's T-Bills Primary Market Auction ("PMA"), the CBN successfully offered N179.8bn worth of instruments across 91-, 182-and 364-Day at respective stop rates of 11.1%, 11.75% and 13.3%. In line with our expectations, the auction recorded an oversubscription across all tenors, albeit, investors demand for long tenor bill surpassed other maturities as the 91-, 182-Day bills parred at an oversubscription level of 1.5x while the 364-Day instrument was 2.1x oversubscribed.

 

Please see a detailed summary in the table below:

Auction Date

18-Sep-19

18-Sep-19

18-Sep-19

Allotment / Issue Date

19-Sep-19

19-Sep-19

19-Sep-19

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

3,000,000,000

8,385,196,000

168,361,351,000

Total Subscription (N)

4,459,828,000

12,360,196,000

359,964,726,000

Allotment (N)

3,000,000,000

8,385,196,000

168,361,351,000

Range of Bid Rates (%)

10.4000-17.0000

11.3000-12.9800

12.9500-14.8150

Stop Rates (%)

11.1000

11.7500

13.3000

Previous Stop Rates (%)

11.1000

11.7990

13.2860

Bid-to-Cover Ratio

1.5x

1.5x

2.1x

Allotment Ratio

0.7x

0.7x

0.5x

 

As expected, the Apex bank sustained its drive to mop excess liquidity coming from high volume maturities last week. The Bank offered OMO bills worth of N300.0bn across the 91-, 182- and 364-Day tenors. The low level of allotment especially on the 364-Day bill at Wednesday's PMA triggered an excess demand on the long-term OMO bills (2.5x) while the 91- and 175-Day bills recorded weak subscription level at 0.02x and 0.001x respectively. The CBN however allotted 0.7x the subscription on the long term OMO bill.

 

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

26-Dec-19

94

11.20

11.53

16-Jan-20

115

11.40

11.82

13-Feb-20

143

11.60

12.15

16-Apr-20

206

12.01

12.88

27-Aug-20

339

12.70

14.40

OMO Auction

c.100

10.64

10.96

OMO Auction

c.200

11.20

11.93

OMO Auction

c.350

12.90

14.49

 

Going into the week, we expect to see an improvement in system liquidity (N176.1bn short as at Friday) as N 442.1bn worth of OMO maturities would hit the system during the week. Consequently, we expect the CBN to intervene by mopping excess liquidity via an OMO auction on Thursday.

 

Investors are therefore advised to take advantage of T-Bills with attractive yields across the curve as well as the expected OMO.

 

FGN Bonds Market Update: Bearish Momentum Reversed as Average Yield Dips by 7 bps W-o-W

On the contrary, the bond market reversed its bearish run as average yield slipped 7 bps on the back of renewed investor's interest in the market. As a result, average yield settled at 14.1% W-o-W. The 27-JAN-22 (-38bps) Instrument enjoyed most buying interest, trailed by 26-APR-49 (-18 bps) and 18-APR-37 (-15 bps) respectively. On the flip side, the 23-OCT-19 (+25bps) suffered the most sell-off.

 

This week, the Debt Management Office would be reopening instrument worth N150.0bn across 5-(N45.0bn), 10-(N50.0bn), 30-Year (N 55.0bn) tenors through a bond PMA.

 

Please see details of the auction below:

BOND

12.75% FGN APR 2023 (5-Yr Re-opening)

14.55% FGN APR 2029 (10-Yr Re-opening)

14.80% FGN APR 2029 (30-Yr Re-opening)

TTM

3 Years 6months

9 Years 6months

29 Years 6 months

Offer Amount (N)

45,000,000,000

50,000,000,000            

55,000,000,000

 

We anticipate a bearish outing in the bond market as Investors may take position in the upcoming bond PMA. Thus, investors are advised to cherry pick attractive instruments trading at a discount.

 

Please see indicative bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jul-21

2

13.80

14.50

101.03

Jan-22

3

14.05

16.39

105.18

Apr-23

4

14.15

12.75

96.02

Mar-24

5

13.95

14.20

101.95

Mar-25

6

13.85

13.53

98.80

Jan-26

7

14.12

12.50

93.79

Mar-27

8

14.10

16.29

110.01

Feb-28

9

14.12

13.98

99.39

Jul-34

15

14.38

12.15

86.58

Mar-36

17

14.40

12.40

88.18

Apr-37

18

14.40

16.25

112.75

Apr-49

30

14.50

14.80

102.69

 


Proshare Nigeria Pvt. Ltd.


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