Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Tuesday,
October 02, 2018 / 01:32 PM / Afrinvest
Research
The Nigerian Treasury Bills (“T-Bills”) market reversed prior week’s bullish performance as average rate across tenors closed higher by 0.2% W-o-W to settle at 12.5% on Friday. Investors sold off short term instruments particularly 11-Oct-18 (+1.9%) and 18-Oct-18 (+1.6%). The long-term bills also witnessed sell pressures as investors sold off some positions in 1-Aug-19 and 18-Jul-19 bills with rates on both instruments inching higher by 4bps and 3bps respectively. On the flip side, medium term instruments recorded a bullish performance as average rates slid 11bps with buying interest recorded in 3-Jan-19 (-0.5%) and 17-Jan-19 (-0.4%).
Noteworthy to mention is the decision of the Monetary Policy Committee (“MPC”) to hold its key policy rate at 14.0% during its last meeting. That said, following sell-offs in the first 3 trading days, buying interesting resurfaced on Thursday as average rate edged lower 0.1%. The CBN meanwhile did not conduct any Open Market Operation (OMO) auction last week despite buoyant system liquidity at N581.6bn long bolstered by OMO maturity repayment of N260.8bn on Thursday. This may be attributed to CBN’s decision to play less aggressively as portfolio investors wound up their books for the 3rd quarter.
This
week, the CBN will be conducting a Primary Market Auction (“PMA”) to
rollover maturing bills worth N133.5bn. The table below summarises details of
the auction as well as expected stop rate range:
Tenor |
91-Day |
182-day |
364-Day |
Amount
on Offer |
N9.5bn |
N17.6bn |
N106.4bn |
Last
Stop Rate |
11.0000% |
12.2000% |
13.4750% |
Expected
Stop Rate |
11.00%-11.20% |
12.30%-12.50% |
13.30%-13.50% |
Going
into the week, T-Bills and OMO maturities of N133.5bn and N268.2bn are expected
to hit the system coupled with FAAC inflows that came in close of Friday, thus
we expect liquidity level to remain high. While a PMA will be conducted by the
Apex bank to rollover the maturing bills, we expect more OMO auctions this week
as CBN looks to mop up excessive liquidity. Nevertheless, we expect rates to
trend southwards on sustained buying interest in the secondary market due to
high level of system liquidity.
Please
see below rates for today:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
01-Nov-18 |
30 |
9.30 |
9.37 |
29-Nov-18 |
58 |
10.00 |
10.16 |
10-Jan-19 |
100 |
10.70 |
11.02 |
28-Feb-19 |
149 |
11.56 |
12.13 |
OMO Auction |
c.200 |
11.50 |
12.27 |
OMO Auction |
c.300 |
12.20 |
13.68 |
Bonds Market Update: Local Bonds Market Extends Bullish Run on Increased
Buying Enthusiasm
The
Local bonds market extended its bullish run into the second consecutive week as
average yield slid lower by 0.1% W-o-W to 14.5%. The market witnessed increased
appetite for Nigerian bonds particularly among domestic investors on the back
of what proved to be the strongest Bond auction in 8 months with the DMO
selling N96.7bn as against N39.7bn in August (+143.6%) and N66.9bn in July
(+44.5%). Below are full details of the Bond auction held last week:
|
12.75%
FGN APR 2023 |
13.53%
FGN MAR 2025 |
13.98%
FGN FEB 2028 |
Tenor |
5-Year |
7-Year |
10-Year |
Amount
Offered |
N25.0bn |
N25.0bn |
N40.0bn |
Total
Subscription |
N20.7bn |
N12.5bn |
N125.4bn |
Amount
Allotted |
N17.5bn |
N7.4bn |
N71.9bn |
Range
of Bids |
14.7400%-16.1000% |
14.0000%-16.0000% |
12.9800%-16.5000% |
Marginal
Rates |
15.0000% |
15.1500% |
15.2459% |
Bid to
Cover Ratio |
0.8x |
0.5x |
3.1x |
Allotment
Ratio |
0.7x |
0.3x |
1.8x |
This
week, we anticipate the bullish run to continue as domestic investors take
position in instruments with attractive yields.
See
below bond rates for today:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Feb-20 |
2 |
13.20 |
15.54
|
102.79
|
Jul-21 |
3 |
14.50 |
14.50
|
99.94
|
Jan-22 |
4 |
14.10 |
16.39
|
105.84
|
Mar-24 |
6 |
14.55 |
14.20
|
98.69
|
Jan-26 |
8 |
14.75 |
12.50
|
90.09
|
Mar-27 |
9 |
15.00 |
16.29
|
106.05
|
Jul-34 |
16 |
14.80 |
12.15
|
83.92
|
Mar-36 |
18 |
14.90 |
12.40
|
84.57
|
Apr-37 |
19 |
14.80 |
16.25
|
109.08
|
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