Bonds & Fixed Income | |
Bonds & Fixed Income | |
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PROSHARE | |
PROSHARE |
Monday, September 09,
2019 /12:04PM / By Afrinvest Research / Header Image
Credit: Biz Watch Nigeria
In line with our expectations, the upbeat in demand was sustained in the
Treasury Bills ("T-Bills") secondary market last week as system liquidity remained elevated (N862.2bn positive
as at Thursday) amidst the OMO auction that was conducted by the Apex bank on
the same day. Although, system liquidity opened the week negative N68.0bn
spurring sell offs, liquidity from matured OMO bills bolstered demand across
the yield curve during the remaining trading sessions of the week.
Consequently, yields remained pressured as average yield across tenors dipped further by 51bps W-o-W to settle at 13.3% on Friday from 13.8% the previous week. Major buying interests were witnessed at the short and medium end of the curve, particularly, 24-Oct-19 (-126bps), 10-Oct-19 (-126bps) and 12-Dec-19 (-111bps) maturities.
At the anticipated OMO auction on Thursday, the CBN offered a total
of N400.0bn across the 91, 189 and 364day instruments. This was met
with a total subscription of N322.1bn, showing 0.4x, 0.2x and 1.6x bid
to cover ratios respectively, as investors continue to position in longer dated
bills with attractive rates. Nevertheless, stop rates remained unchanged from
that of the previous week auctions.
Going
into the week, the CBN is expected to rollover N158.7bn worth of
maturing T-Bills at the Primary Market Auction this Wednesday, following the
release of its Q4:2019 T-Bills auction calendar.
Please
see details of this week Primary Market Auction below:
Tenor |
91-Day |
182-Day |
364-Day |
Offer Amount
( |
15,000,000 |
14,002,523 |
129,651,700 |
Last Stop
Rate (%) |
11.1000 |
11.5878 |
12.8100 |
Expected
Stop Rate Range (%) |
11.00% - 11.15% |
11.60%-11.70% |
12.85%-13.00% |
Furthermore,
inflows from maturing OMO bills (N390.7bn) is expected to hit the system
thereby bolstering system liquidity. We expect the CBN to maintain its pace of
excess liquidity mop-ups to keep system liquidity in check.
Investors
are therefore advised to take position in T-Bills and OMO offers with
attractive yields.
Please
see indicative secondary market T-Bills rates below:
Maturity |
Tenor (Days) |
Rate (%)
p.a. |
Yield (%)
p.a. |
17-Oct-19 |
38 |
10.20 |
10.31 |
7-Nov-19 |
59 |
10.30 |
10.47 |
23-Jan-20 |
136 |
11.50 |
12.01 |
13-Feb-20 |
157 |
11.70 |
12.32 |
18-Jun-20 |
283 |
12.20 |
13.47 |
13-Aug-20 |
339 |
12.16 |
13.71 |
OMO Auction |
c.100 |
10.64 |
10.96 |
OMO Auction |
c.200 |
11.20 |
11.93 |
OMO Auction |
c.350 |
12.90 |
14.72 |
Rates are valid till 01:45pm today (09-Sept-2019)
*Please note that the minimum subscription for T-Bills
is N100,000.00
FGN Bonds Market Update: Average Yield Advance 20bps W-o-W due to Sell-offs
The bullish run in the FGN bonds market was reversed last week as investors sold off on their medium and long positions to take advantage of anticipated attractive rates at the OMO auctions. Thus, average yield across all instruments closed at 14.2% from 14.0% the previous week improving 20bps W-o-W. Major Sell-offs were witnessed at the 12-Sep-20 (+129bps), 20-Sep-20 (-126bps) and 10-Oct-20 (+117bps) maturities.
Going into this week, we expect to see tapered demand within the bond market on the back of bargain hunting as investors may take advantage of long-term OMO offerings with attractive rates.
Investors
are therefore advised to take advantage of bonds with attractive yields and
trading at a discount.
Please see indicative bond rates for today below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Jul-21 |
2 |
13.80 |
14.50 |
101.06 |
Jan-22 |
3 |
14.05 |
16.39 |
104.55 |
Apr-23 |
4 |
14.15 |
12.75 |
96.09 |
Mar-24 |
5 |
13.95 |
14.20 |
100.81 |
Mar-25 |
6 |
13.85 |
13.53 |
98.78 |
Jan-26 |
7 |
14.12 |
12.50 |
93.30 |
Mar-27 |
8 |
14.10 |
16.29 |
109.94 |
Feb-28 |
9 |
14.12 |
13.98 |
99.30 |
Jul-34 |
15 |
14.38 |
12.15 |
86.42 |
Mar-36 |
17 |
14.40 |
12.40 |
87.50 |
Apr-37 |
18 |
14.40 |
16.25 |
111.69 |
Apr-49 |
30 |
14.50 |
14.80 |
101.99 |
Rates are valid till 01:45pm today (09-Sept-2019)
*Please note that the minimum subscription for Bonds is N20,000,000.00
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