The Bulls Re-Emerge As Average Yield On T-Bills Dips To 13.3% WoW On System Liquidity Boost

Proshare

Monday, September 30, 2019 / 12:42PM / By Afrinvest Header Image Credit: Business Trumpet

 

Last week, the T-Bills secondary market reversed its two-week bearish run on the back of improved system liquidity (N260.0bn long as at Tuesday) stemming from a FAAC disbursement (N341.0bn) which hit the financial system the previous Friday. In addition, OMO maturities worth N422.0bn further buoyed system liquidity, spurring buying interests particularly on the medium and longer end of the curve - 26-Mar-20 (-129bps), 02-Apr-19 (-113bps) and 11-Jun-20 (-93bps). Consequently, average yield across all tenors closed at 13.3% W-o-W, 34bps lower than 13.6% the previous week.

 

Despite improved system liquidity, the CBN conducted a much anticipated OMO auction once last week, offering a total of N250.0bn on Thursday across the 84 (N20.0bn), 184(N30.0bn) and 364-day(N200.0bn) tenors. The short- and medium- term maturities were 98.5% and 93.0% undersubscribed respectively as bills with similar tenors commanded high rates in the secondary market. However, the 364-day bill was 339.0% oversubscribed (N200.0bn offer vs. N678.3bn subscription) as more investors positioned on the longer end of the curve. As a result, the Apex bank prorated all successful bids by 44.0% allotting a total of N300.0bn to investors. Consequently, on Friday, the yield on longer-dated T-Bills shed 30bps as investors with unfilled bids from the auction (c. N378.3bn) positioned in these instruments with more demand on the 17-Sep-20 bill.

 

Going into the 4-day trading session this week (due to the Independence Day break), the CBN is expected to rollover a total of N134.0bn worth of maturing T-Bills at the Primary Market Auction on Wednesday. We expect to see more investors position at the longer end of the curve.

 

Please see details of this week's Primary Market Auction below:

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

10,000,000

17,600,581

106,370,499

Last Stop Rate (%)

11.1000

11.7500

13.3000

Expected Stop Rate Range (%)

11.30% - 11.50%

11.70%-12.00%

13.00%-13.40%

In addition to the maturing T-Bills, expected OMO maturity of N472.4bn on Thursday will further bolster system liquidity. Investors are advised to take advantage of T-bills with attractive yields across all tenors in the primary and secondary markets as well as potential OMO offers.

 

Please see below T-Bills indicative rates for today:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

24-Oct-19

24

9.10

9.15

5-Dec-19

66

10.20

10.39

16-Jan-20

108

11.30

11.69

13-Feb-20

136

11.41

11.92

16-Apr-20

199

11.40

12.16

27-Aug-20

332

12.56

14.18

OMO Auction

c.100

12.30

13.22

OMO Auction

c.200

11.41

12.11

OMO Auction

c.350

12.90

14.61

Rates are valid till 01:45pm today (30-Sept-2019)

*Please note that the minimum subscription for T-Bills is N100,000.00

 

FGN Bonds Market Update: Bullish Run Reversed as Average Yield Advances 5bps W-o-W 

Contrary to happenings in the T-Bills space, activity in the secondary bonds market was bearish as both local and offshore investors sold off their positions ahead of the Bond Auction that held on Wednesday. Consequently, average yield on all instruments shed 5bps to settle at 14.20% on Friday. Major sell-offs were recorded on the 18-Apr-37 (+20bps), 17-Mar-27 (+18bps) and 23-Feb-28 (+13bps) maturities.

 

At the Bond Auction, the Debt Management Office ("DMO") offered a total of N150.0bn across the 5 (N45.0bn), 10(N50.0bn) and 30-year (N55.0bn) bonds. The result showed that the 5-year bond was 68.2% undersubscribed while the 10 and 30-year bonds were 165.8% and 115.7% oversubscribed respectively. The DMO raised a total of N100.0bn across all three tenors with stop rates on the APR-2023, APR-2029 and APR-2049 instruments inching higher at 14.39%, 14.43% and 14.64% respectively. Corresponding coupon rates of 12.75%, 14.55% and 14.80% will be maintained.

 

Find below a summary of the Bond Auction result:

Auction Date

25-Sep-19

25-Sep-19

25-Sep-19

Allotment/Issue Date

27-Sep-19

27-Sep-19

27-Sep-19

Term to maturity

3 Years,7 months

9 Years, 7 months

29 Years,7 months

Offer Amount (N)

45,000,000,000.00

50,000,000,000.00

55,000,000,000.00

Total Subscription (N)

14,330,000,000.00

82,910,000,000.00

63,660,000,000.00

Allotment (N)

6,830,000,000.00

56,160,000,000.00

37,020,000,000.00

Range of Bid Rates (%)

13.9900 - 14.6500

13.9900 - 15.0000

13.0000 - 15.0999

Stop rates (%)

14.3900

14.4300%

14.6400%

Previous stop rates (%)

14.2900

14.3900

14.5900

Bid-to-Cover Ratio

0.3x

1.7x

1.2x

Allotment Ratio

0.5x

0.7x

0.6x

 

This week, we anticipate more activities in the secondary bond market as investors bargain hunt attractive instruments. Thus, investors are advised to cherry pick higher yielding instruments trading at a discount particularly at the medium end of the curve

 

Please see below T-Bills indicative rates for today

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

2

13.40

14.50

101.64

Jan-22

3

13.53

16.39

105.48

Apr-23

4

14.27

12.75

95.83

Mar-24

5

13.52

14.20

102.20

Mar-25

6

13.90

13.53

98.60

Jan-26

7

14.02

12.50

93.72

Mar-27

8

13.99

16.29

110.42

Feb-28

9

14.12

13.98

99.28

Jul-34

15

14.33

12.15

86.69

Mar-36

17

14.20

12.40

88.64

Apr-37

18

14.23

16.25

112.90

Apr-49

30

14.58

14.80

101.45

Rates are valid till 01:45pm today (30-Sept-2019)

 

*Please note that the minimum subscription for Bonds is N20,000,000.00

 

Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
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