Bullish Momentum Sustained as Average T-Bills Yield Contracts 80bps to 11.1%

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Monday, July 15, 2019  / 12:55PM / By Afrinvest Research / Header Image Credit: MrPepe

 

The Treasury Bills (“T-Bills”) secondary market sustained its bullish trend due to non-issuance of OMO bills by the Apex bank. The T-Bills demand was bolstered on the back of the CBN’s new policy which reduced the excess deposits placed by Deposit Money Banks at the SDF (Standing Deposit Facility) from N7.5bn to N2.0bn. More so, system liquidity remained strong (N326.5bn long as at Friday) as OMO maturities worth (N105.2 bn) hit the system during the week.

Consequently, average yield across all tenors contracted to settle at 11.1%, shedding 80 bps W-o-W. Buying interests were witnessed across all tenors, particularly the 5-Dec-19 (-165bps), 14-Nov-19(-154bps) and 28-Nov-19(-147bps) maturities.

This week, the Apex bank is scheduled to roll over maturing bills worth N107bn through the Primary Market Auction( “PMA”) across the 91(N5.8bn), 182(N26.6bn) and 364-Day(N74.6bn) tenors.

 

Please see below our PMA expectations

TENOR

91- DAY

182 - DAY

364 - DAY 

Offer Amount (N)

5,849,034

26,600,000

74,598,126

Last Stop Rate

9.60 %

11.89 %

12.02 %

Expected Stop Rate Range (%)

9.0%-9.5%

11.0%-11.3%%

11.4%-11.7%

 

Going into this week, we expect to see a boost in system liquidity on the back of maturities from T-Bills and OMO bills worth N107.0bn and N41.7bn respectively. In the absence of OMO auctions, we expect a sustained bullish trend which may be boosted by unfilled bids from the PMA on Thursday.

Investors are advised to take advantage of T-Bills with attractive yields as well as potential OMO bill offerings.

 

Please see indicative secondary market T-Bills rates below

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

10-Oct-19

87

8.50

8.68

5-Dec-19

143

9.20

9.54

26-Dec-19

164

9.70

10.14

16-Jan-20

185

10.20

10.76

20-Feb-20

220

10.30

10.98

 

FGN Bonds Market Update: The Bulls take Centre Stage as Average Yield Dips by 14 bps W-o-W

The bond market sustained its bullish outlook as average yield trended southwards by 14 bps to settle at 12.9% W-o-W, with the short-term instruments enjoying significant buying interests. Consequently, high demand was witnessed especially on the 16-AUG-19(-132bps) and17-JAN-20(-113bps). On the flip side, the 15-JUL-21(+23bps) instrument suffered the most sell-off.

This week, we anticipate a continued improvement in the bond market as investors take position on instruments with attractive yields. Investors are advised to cherry pick instruments with higher yields across the curve.

 

Please see indicative bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jul-21

2

13.75

14.50

101.27

Jan-22

3

13.80

16.39

105.37

Apr-23

4

14.00

12.75

96.37

Mar-24

5

14.00

14.20

100.62

Mar-25

6

14.10

13.53

97.77

Jan-26

7

14.25

12.50

92.71

Mar-27

8

14.20

16.29

109.51

Feb-28

9

14.22

13.98

98.79

Jul-34

15

14.40

12.15

86.30

Mar-36

17

14.30

12.40

87.99

Apr-37

18

14.25

16.25

112.75

Apr-49

30

14.35

14.80

103.02



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