Bearish Momentum Resumes as Average NT-Bills Yield Advances 73Bps WoW To 13.1%

Proshare

Tuesday, November 12, 2019   /4:30 PM  / By  Afrinvest Research / Header Image Credit: UBA

 

Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market reversed its bullish outing from the previous week as an array of policy directives from the Apex bank continues to drive market activities. Following the exclusion of local individuals and corporates from the OMO market and the subsequent provision of liquidity to foreign investors in the OMO secondary market by the Apex bank, activities in the secondary T-Bills market was tepid as foreign Investors exited their positions in NT-Bills to take position in last week's OMO auction due to the wide yield differential. 

 

Thus, average yield across all tenors advanced 73 bps W-o-W to settle at 13.1% as the short-, medium, and long-term bills witnessed sell pressures, advancing 60bps, 85bps and 75bps respectively.

 

This week, the CBN is scheduled to roll over maturing NT-Bills worth N125.2bn through another PMA across the 91-(N4.4bn), 182-(N12.9bn) and 364-Day(N107.9bn) tenors.

 

Please see below our expectations below:

TENOR

91- DAY

182 - DAY

364 - DAY

Offer Amount (N)

4,384,180,000

12,920,900,000             

107,938,478,000

Last Stop Rate (%)

9.4999

10.4500

11.5000

Expected Stop Rate Range (%)

9.0%-10.0%

10.00%-10.5%

11.0%-11.5%

 

In a bid to mop excess liquidity from maturities last week (N357.1bn), the Apex Bank offered OMO bills worth of N300.0bn across the 89-,180- and 362-Day tenors. There was an undersubscription across the medium and long dated bills at (0.3x) and (0.9x) respectively, while the short dated OMO bill recorded no subscription. Consequently, the market was cleared at 11.69% and 13.30% respectively for the 180-,362-day bills.   

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

12-Dec-19

30

8.50

8.56

30-Jan-20

79

9.50

9.70

2-Apr-20

142

10.30

10.73

13-Aug-20

275

11.00

11.99

24-Sep-20

317

11.10

12.28

29-Oct-20

352

11.20

12.56

Rates are valid till 01:45pm today (12-Nov-2019)

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

 

Going into the week, we expect to see an improvement in system liquidity (N436.5bn long as at Friday) as N406.1bn worth of OMO maturities and N125.24bn worth of NT-Bills maturities would hit the financial system. Consequently, we expect the CBN to intervene by mopping up excess liquidity via an OMO auction. Investors are therefore advised to take advantage of NT-Bills with attractive yields across the curve.

 

FGN Bonds Market Update: Bullish Momentum Sustained as Average Yield Dips by 26 bps W-o-W 

On the contrary, the bond market sustained its bullish run as average yield slipped 26 bps on the back of renewed investors interest in the market. Following the Apex bank restrictions in the OMO market, local investors continued to take position, especially in the attractive short dated bond instruments given the tepid performance of the T-Bills market. As a result, average yield settled at 12.9% W-o-W. The 27-APR-23 (-99bps) Instrument enjoyed most buying interest, trailed by 26-JAN-22 (-73 bps) and 14-MAR-24 (-59 bps) respectively. On the flip side, the 13-FEB-19 (+134bps) suffered the most selloffs.

 

Please see indicative bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

2

11.50

14.50

104.40

Jan-22

3

11.40

16.39

109.43

Apr-23

4

11.70

12.75

102.90

Mar-24

5

11.70

14.20

108.28

Mar-25

6

11.50

13.53

107.92

Jan-26

7

12.00

12.50

102.10

Mar-27

8

12.20

16.29

119.42

Feb-28

9

12.50

13.98

107.45

Jul-34

15

12.70

12.15

96.33

Mar-36

17

12.80

12.40

97.25

Apr-37

18

12.65

16.25

125.07

Apr-49

30

13.20

14.80

111.82

Rates are valid till 01:45pm today (12-Nov-2019)

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

 

We anticipate a sustained bullish momentum in the bonds market as investors continue to seek alternatives to reinvest maturing OMO bills. Thus, investors are advised to cherry pick attractive instruments relative to NT-Bills as well as bonds with higher modified duration.

 

Proshare Nigeria Pvt. Ltd.



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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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