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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 ( |
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
Related News
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2. CBN Sells
364-Day OMO T-Bills On A 46.00% Pro-rata Basis, Cuts Rates By 2bps
3. Summary of FGN
Bond Auction Results For September 2019
4. September 2019
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5. DMO Struggles to
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6. FMDQ Securities
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Sustained As Average T-Bills Yield Advances 23bps WoW To 13.6%
8. NSE Lists FGN
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9. NSE Lists Access
Bank's N30bn 7-Year 15.5% Fixed Rate Subordinated Unsecured Bonds Due 2026
10. Money Market
Rates Crash As FAAC Inflows Bolster Liquidity
11. Coupon
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