The Bears Take Center Stage As Average T-Bills Yield Advances 8bps WoW To 13.4%

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Monday, September 16, 2019   /11:57AM  / Afrinvest Research / Header Image Credit: MrPepe

 

Last week, the Treasury Bills ("T-Bills") secondary market closed on bearish note as investors sold off to take position in the Primary Market and OMO auctions. Consequently, average yield across all tenors advanced 8 bps W-o-W to settle at 13.4%. Sell pressures were witnessed on the short and mid- segments of the curve as average yield rose 5bps and 39bps respectively.

In last week's Primary Market Auction ("PMA"), the CBN successfully offered N158.7bn worth of bills across 91-, 182-and 364-Day at respective stop rates of 11.1%, 11.80% and 13.29%. As anticipated, the 91-, 182- and 364-Day instruments were oversubscribed by 2.2x, 1.7x and 2.1x respectively. 


Please see a detailed summary in the table below:

Auction Date

11-Sep-19

11-Sep-19

11-Sep-19

Allotment / Issue Date

12-Sep-19

12-Sep-19

12-Sep-19

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

15,000,000,000

14,002,523,000

129,651,700,000

Total Subscription (N)

32,324,750,000

24,214,529,000

269,358,167,000

Allotment (N)

15,000,000,000

14,002,523,000

129,651,700,000

Range of Bid Rates (%)

9.6000 - 14.0000

11.2000 - 12.9800

12.5000 - 14.4480

Previous Stop Rates (%)

11.1000

11.5878

12.8900

Stop Rates (%)

11.1000

11.7990

13.2860

Bid-to-Cover Ratio

2.2x

1.7x

2.1x

Allotment Ratio

0.5x

0.6x

0.5x



In a bid to curtail possible excess liquidity in the system as a result of expected high volume maturities, the Apex Bank issued OMO bills last week. At the OMO auction, a total of N300.0bn across the 91-,182- and 364-Day tenors was offered and due to low allotment at Wednesday's PMA, we witnessed excess demand on the short- and long-term bills (2.8x and 1.9x respectively) while the 182-Day bill was 0.3x undersubscribed. The CBN however prorated OMO winnings on the 364-Day bill by 69.6% due to the high level of bids.

This week, the CBN is scheduled to roll over maturing bills worth N179.8bn through another PMA across the 91-(N3.0bn), 182-(N8.4bn) and 364-Day (N168.4bn) tenors. 


TENOR

91- DAY

182 - DAY

364 - DAY 

Offer Amount (N)

3,000,000,000

8,385,196,000            

168,361,351,000

Last Stop Rate (%)

11.1

11.80

13.29

Expected Stop Rate Range (%)

11.0%-11.40%

11.70%-12.0%

13.2%-13.5%

 

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

26-Dec-19

101

11.00

11.35

16-Jan-20

122

11.40

11.85

13-Feb-20

150

11.60

12.18

16-Apr-20

213

12.00

12.90

27-Aug-20

346

12.61

14.32

OMO Auction

c.100

10.64

10.96

OMO Auction

c.200

11.20

11.93

OMO Auction

c.350

12.90

14.72


Going into the week, we expect to see a boost in system liquidity (N34.9bn positive as at Friday) on the back of a combined T-Bills maturities of N536.3bn from OMO (N356.5bn) and PMA (N179.8bn). As a result, we expect the CBN to intervene by mopping up excess liquidity via OMO auctions.

Investors are therefore advised to take advantage of T-Bills with attractive yields across the curve as well as primary offerings this week.

 

FGN Bonds Market Update: Bearish Momentum Sustained as Average Yield Advances by 5 bps W-o-W

In the same vein, the bond market sustained its bearish run as average yield trended northwards by 5 bps as a result of continued sell-off in the market. As a result, average yield settled at 14.2% W-o-W. The medium-term instruments particularly the 23-MAR-25 (+49bps) witnessed the most sell pressure. On the flip side, the 13-FEB-24(-25bps) enjoyed a slight buying interest.

This week, we anticipate a continued bearish trend in the bond market as market activities might remain tepid. Thus, investors are advised to cherry pick attractive instruments trading at a discount.

 

Please see indicative bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jul-21

2

13.80

14.50

101.04

Jan-22

3

14.05

16.39

104.61

Apr-23

4

14.15

12.75

95.97

Mar-24

5

13.95

14.20

100.75

Mar-25

6

13.85

13.53

98.79

Jan-26

7

14.12

12.50

93.00

Mar-27

8

14.10

16.29

109.69

Feb-28

9

14.12

13.98

99.30

Jul-34

15

14.38

12.15

86.09

Mar-36

17

14.40

12.40

87.29

Apr-37

18

14.40

16.25

111.48

Apr-49

30

14.50

14.80

102.13



Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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