Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday, April 29 2019 / 01:30 PM / by Afrinvest Research
The
Treasury bills ("T-Bills") secondary market last week
sustained its bullish run for the fourth consecutive week as improved system
liquidity fueled buying interests by investors. The upbeat in system liquidity
stemmed from matured OMO bills on Thursday (N46.3bn). Consequently, system
liquidity closed at c. N464.7bn on Friday due to the absence of OMO auction.
As
a result, average yields across tenors dipped 10bps W-o-W to settle at 13.1% on
Friday. The short-term maturities declined the most by 36bps while the medium
and long-term instruments shed 24bps and 9bp W-o-W respectively. However, major
buying interests were recorded on the 30-May-19 (-94bps), 1-Aug-19 (-69ps) and
19-Dec-19 (-45bps) maturities.
In
line with our expectation, the CBN resumed its customary OMO auctions on
Tuesday offering a total of N200.00bn across the 93-day, 184-day and 359- day
tenors. While the short- and medium-term instruments were undersubscribed with
a bid to cover ratio of 0.2x and 0.03x respectively, the 359-day instrument had
an oversubscription of 2.8x signaling continued investors preference for long
term instruments.
Going
into the week, the Apex Bank is expected to conduct a Primary market
auction("PMA") on Thursday, due to the public holiday on
Wednesday, where a total of N109.7bn worth of maturing T-Bills will be rolled
over across the 91(N28.0bn), 182 (N43.5bn) and 364-day (N38.2bn) tenors.
Please
see details of this week Primary Market Auction below:
Tenor |
91-Day |
182-Day |
364-Day |
Offer
Amount ( |
28,018,956,000.00 |
43,522,527,000.00 |
38,167,692,000.00 |
Last Stop
Rate (%) |
10.1499 |
12.5000 |
12.7400 |
Expected
Stop Rate Range (%) |
10.1% - 10.20% |
12.4%-12.6% |
12.6%-12.70% |
Furthermore,
we expect more frequent OMO mop-ups by the Apex bank to persist this week as
T-Bills (N109.7bn) and OMO maturities (N73.3bn) worth N172.5bn as well
as FAAC inflows of (c. N350.0bn) are scheduled to hit the system, thereby
bolstering system liquidity. Investors are therefore advised to take advantage
of bills with attractive yields especially at the longer end of the curve.
Please see below T-Bills
indicative rates for today:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
30-May-19 |
31 |
9.00 |
9.07 |
6-Jun-19 |
38 |
9.00 |
9.09 |
8-Aug-19 |
101 |
10.50 |
10.81 |
5-Sep-19 |
129 |
11.70 |
12.20 |
3-Oct-19 |
157 |
11.95 |
12.65 |
14-Nov-19 |
199 |
11.80 |
12.73 |
19-Dec-19 |
234 |
12.10 |
13.12 |
23-Jan-20 |
269 |
12.00 |
13.16 |
27-Feb-20 |
304 |
12.10 |
13.46 |
OMO Auction |
c.100 |
10.50 |
10.81 |
OMO Auction |
c.200 |
12.00 |
13.30 |
OMO Auction |
c.300 |
12.50 |
14.20 |
FGN Bonds Update: Average Yield Across Instruments Inch Higher W-o-W
following Sell-offs across tenors
In the bonds market last week, performance was relatively bearish as
investors sold off their positions ahead of the primary market bond auction
which held on Wednesday. Consequently, average
yields advanced 18bps W-o-W to settle at 14.2%. Major selloffs were recorded on
the medium end of the yield curve, particularly the 27-Jan-22 (-81bps),
13-Mar-22 (-62bps) and 13-Feb-22 (-56bps) maturities.
At
the primary market auction last Wednesday, the Debt Management Office (“DMO”)
offered a total of N100bn across the 12.75 APR 2023 (re-opening), new
Benchmark 10-year and 30-year bonds. The auction results showed a sustained
trend in investors preference for longer term bonds as the newly issued 10-year
and 30-year bonds were oversubscribed by 1.3x and 4.0x respectively.
Conversely, the 2023 instrument (re-opened) was undersubscribed with a
bid-to-cover ratio of 0.4x.
In
addition, the DMO reviewed the stop rates for three tenors higher in tandem
with secondary market rates, with the new benchmark 10 and 30-year bonds
offered at 14.55% and14.80% respectively.
Please
see below a summary of the Bond auction result
Auction Date |
24-Apr-19 |
24-Apr-19 |
24-Apr-19 |
Allotment / Issue Date |
26-Apr-19 |
26-Apr-19 |
26-Apr-19 |
Term to maturity |
4 Years |
10 Years |
30 Years |
Offer Amount (N) |
40,000,000,000.00 |
40,000,000,000.00 |
20,000,000,000.00 |
Total Subscription (N) |
16,610,000,000.00 |
52,280,000,000.00 |
80,410,000,000.00 |
Allotment (N) |
6,810,000,000.00 |
37,430,000,000.00 |
53,160,000,000.00 |
Range of Bid Rates (%) |
14.2000 – 16.3000 |
14.0000 – 16.0000 |
13.0100 – 17.5000 |
Stop rates (%) |
14.5000 |
14.5500 |
14.8000 |
Previous stop rates (%) |
13.5000 |
13.98% |
NIL |
Bid-to-Cover Ratio |
0.4x |
1.3x |
4.0x |
Allotment Ratio |
0.2x |
0.9x |
2.7x |
Going
into the week, we expect the bond market to open on a positive note as
investors continue to take advantage of attractive yields on the longer end of
the curve. Nevertheless, we advise investors to trade cautiously and take
advantage of bonds trading at attractive yields and at discounts.
Please see indicative FGN bond
rates below:
Bond |
Tenor
(Years) |
Yield
(%) |
Coupon
(%) |
Implied
Price |
Jul-21 |
1 |
14.30 |
14.50 |
100.31 |
Jan-22 |
2 |
14.30 |
16.39 |
104.55 |
Apr-23 |
3 |
14.47 |
12.75 |
94.91 |
Mar-24 |
5 |
14.05 |
14.20 |
100.47 |
Mar-25 |
7 |
14.15 |
13.53 |
97.54 |
Jan-26 |
8 |
14.40 |
12.50 |
91.92 |
Mar-27 |
9 |
14.44 |
16.29 |
92.03 |
Feb-28 |
15 |
14.40 |
13.98 |
97.88 |
Jul-34 |
17 |
14.35 |
12.15 |
86.47 |
Mar-36 |
18 |
14.39 |
12.40 |
87.46 |
Apr-37 |
19 |
14.44 |
16.25 |
111.49 |
Rates are valid till 01:45pm today (29-Apr-2019)
*Please note that the minimum subscription for Bonds is N20,000,000.00
Related News
1. Summary of April
2019 FGN Bond Auction Results
2. Average Yield
Moderates to 13.3% on Absence of OMO Auctions
3. Average Money
Market Rate Fell By 10.72% To Settle At 10.22%
4. Invest in FGN
Monthly Bond Auction – April 2019
5. Ecobank Launches
New 5-Year Eurobond at 9.75% Re-Offer
6. Outlook For
Yields On FGN Bonds Remain Relatively Stable With Renewed Buying Interests On
Maturities
7. Bond Yields
Maintain Slight Uptrend Following Selloff on the 20-year
8. Bond Yields
Trend Higher Following Selloff on Mid and Long Tenors
9. Funding For CBN
Wholesale FX Auction Pressures Short Term Rates Higher
10. Average T-Bills
Yield Contracts Marginally to 13.4% as CBN Resumes OMO Auctions
11. Average Money
Market Rate Rose By 5.45% To Settle At 15.72%
12. Bond Yields
Compress Marginally Following Bargain Hunt on Short Tenors