Bearish Momentum Sustained as Average T-Bills Yield Advanced 130bps to 15.2%

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Monday, August 26, 2019    / 11:54AM / By Afrinvest Research  / Header Image Credit: Bookkeeper.com.ng

 


Last week, the Treasury Bills ("T-Bills") secondary market sustained its bearish trend, attributed to tight system liquidity (N348.4bn short as at Friday) as well as sustained sell-offs by Foreign Portfolio Investors following concerns of weakening global growth.

 

Consequently, average yield across all tenors advanced 130bps W-o-W to settle at 15.2%. Sell pressures were witnessed across all segments of the curve as average yield on the short, medium and long end of the curve rose 109bps, 65bps and 191bps W-o-W respectively. The Apex bank conducted an OMO auction on Thursday which resulted in a "no sale" following weak subscription levels - investors demanded for higher rates - across all tenors (N110.0bn offered vs. N19.4bn subscription) despite FAAC allocation of (N760bn) and OMO maturities (N45.7bn) which were unable to elevate liquidity level at the end of the week.

 

This week, the CBN is scheduled to roll over maturing bills worth N208.0bn through the Primary Market Auction("PMA") across the 91 (N24.4bn), 182 (N38.8bn) and 364-Day (N145.5bn) tenors.

 

Please see below our PMA expectations below:

TENOR

91- DAY

182 - DAY

364 - DAY 

Offer Amount (N)

24,372,790         

38,751,846            

145,475,021

Last Stop Rate (%)

9.70

11.35

12.00

Expected Stop Rate Range (%)

11.5-12.0

12.0-12.5

12.5-13.0

 


Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

26-Sep-19

31

11.00

11.10

7-Nov-19

73

11.10

11.35

26-Dec-19

122

13.00

13.59

16-Jan-20

143

13.06

13.76

27-Feb-20

185

12.90

13.80

16-Apr-20

234

13.00

14.18

 

Going into the week, we expect to see a boost in system liquidity on the back of maturities from T-Bills and OMO bills worth N208.0bn and N393.3bn respectively. The CBN is also expected to mop up excess liquidity via OMO auctions. The T-Bills secondary market may sustain its bearish run as investors take position in the PMA offer and potential OMO offerings at more attractive yields. 

 

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

 

FGN Bonds Market Update: Bearish Momentum Sustained as Average Yield Advances by 71 bps WoW

 

In the same vein, the bond market sustained its bearish run as average yield trended northwards by 71 bps as a result of continued sell-off in the market. As a result, average yield settled at 14.4% W-o-W. The short-term instruments particularly the 20-Sep-19 (+184bps) and 16-Aug-20(+183bps) witnessed the most sell pressure. On the flip side, the 14-MAR-24(-15bps) enjoyed a slight buying interest.

 

In addition, during the week, the Debt Management Office ("DMO") held a Primary Market Auction ("PMA") for instruments worth (N145.0bn) across the APR-2023(reopening), APR-2049(reopening) and APR-2049(reopening). However, an under subscription was recorded across all tenors (N145.0bn offered vs. N95.1bn subscription).

 

Find below a summary of the Bond Auction result:

Auction Date

21-Aug-19

21-Aug-19

21-Aug-19

Allotment/Issue Date

23-Aug-19

23-Aug-19

23-Aug-19

Term to maturity

3 Years,8 months

9 Years, 8 months

29 Years,8 months

Offer Amount (N)

40,000,000,000.00

50,000,000,000.00

55,000,000,000.00

Total Subscription (N)

10,410,000,000.00

37,470,000,000.00

47,210,000,000.00

Allotment (N)

2,050,000,000.00

2,680,000,000.00

10,300,000,000.00

Range of Bid Rates (%)

12.7500 - 15.5000

13.7500 - 15.7500

13.0500 - 15.7500

Stop rates (%)

14.2900

14.3900%

14.5900%

Previous stop rates (%)

13.3500

13.6400

14.1200

Bid-to-Cover Ratio

0.3x

0.8x

0.9x

Allotment Ratio

0.2x

0.07x

0.2x

 

This week, we anticipate a continued bearish trend in the bond market as foreign investors continue to reduce their exposure to the Nigerian bonds market amidst the global economic risk concerns. 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

13.50

14.50

101.58

Jan-22

3

14.00

16.39

104.73

Apr-23

4

14.10

12.75

96.18

Mar-24

5

13.75

14.20

101.46

Mar-25

6

13.70

13.53

99.32

Jan-26

7

14.03

12.50

93.64

Mar-27

8

14.10

16.29

109.95

Feb-28

9

14.15

13.98

99.17

Jul-34

15

14.15

12.15

87.67

Mar-36

17

14.15

12.40

88.90

Apr-37

18

14.16

16.25

113.38

Apr-49

30

14.49

14.80

102.05


Proshare Nigeria Pvt. Ltd.



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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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