Bonds & Fixed Income | |
Bonds & Fixed Income | |
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PROSHARE | |
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Monday, January 06, 2020
/12:18 PM / By Afrinvest Research / Header Image Credit: Brecorder
Last
week, the Nigerian Treasury Bills ("NT-Bills") secondary market extended
its bullish run, buoyed by improved system liquidity (N1.5trn long as at
Friday). Consequently, average NT-Bills yield declined further shedding 102bps
to settle at 4.6% W-o-W while average yield at the OMO market settled 13.1% W-o-W. Buying interest was witnessed across all tenors, save for
the 30-Jan-20 (+20bps) which experienced sell-off and 16-Jan-20 which remained
flat W-o-W.
The
CBN rolled over maturing bills worth N74.8bn across 91-Day, 182-Day and
364-Day in last Wednesday's Primary Market Auction (:PMA"), closing at
respective stop rates of 3.5%, 4.9% and 5.2%. All tenors were
oversubscribed as they recorded a bid-cover ratio of 3.7x, 1.6x and 2.4x
respectively.
Please
see a detailed summary in the table below:
Auction Date |
02-Jan-20 |
02-Jan-20 |
02-Jan-20 |
Allotment
/ Issue Date |
02-Jan-20 |
02-Jan-20 |
02-Jan-20 |
Tenor |
91-Day |
182-Day |
364-Day |
Offer
Amount ( |
10,000,000,000 |
20,000,000,000 |
44,837,720,000 |
Total
Subscription ( |
37,150,766,000 |
31,631,605,000 |
105,901,127,000 |
Allotment
( |
10,000,000,000 |
20,000,000,000 |
44,837,720,000 |
Range
of Bid Rates (%) |
3.0000-14.0000 |
3.8400-6.5000 |
3.9800-13.2000 |
Stop
Rates (%) |
3.5000 |
4.9000 |
5.2000 |
Previous
Stop Rates (%) |
4.0000 |
5.0000 |
5.4950 |
Bid-to-Cover
Ratio |
3.7x |
1.6x |
2.4x |
Allotment
Ratio |
0.3x |
0.6x |
0.4x |
In
addition, the Apex Bank offered OMO bills worth N300.0bn across 81-, 179- and
361-Day tenors to mop liquidity from the financial system. However, there was "no sale on the short and mid tenor bill while the long-dated bill recorded a
subscription of N544.8bn putting oversubscription at 2.2x. Thus,
clearing at 13.28% stop rate.
Given
the robust system liquidity and an expected N423.2bn worth of OMO
maturities hitting the financial system this week, we expect the CBN to sustain
its weekly OMO auction to put liquidity in check. We believe the NT-Bills space
will sustain its bullish run albeit at a slower pace as investor's source for
alternative investments given the low yield environment. We still advise
risk-averse investors to cherry pick mid-long term bills that are most
attractive.
FGN Bonds Market Update: Bullish Run Sustained as Average Yield Dips by 14 bps WoW
Similarly, the bulls extended their run at the domestic bond market. Thus, average yield dipped 14 bps as local investors continue to bargain-hunt for attractive yields in the market. The market has continued to enjoy buying interest, especially in the attractive short dated bond instruments, given the relatively low yield environment in the NT-Bills market.
As
a result, average yield settled at 10.7% W-o-W. The 27-JAN-22 (-131bps)
Instrument enjoyed most buying interest, trailed by 23-MAR-25 (-62 bps) and
13-MAR-27 (-58 bps) respectively.
We anticipate a sustained bullish momentum in the
bonds market as local investors continue to seek alternatives to reinvest
maturing OMO bills. Thus, investors are advised take advantage of instruments
with attractive yield.
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