Bonds & Fixed Income | |
Bonds & Fixed Income | |
2971 VIEWS | |
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Monday,
September 17, 2018 / 05:43 PM / Afrinvest Research
Last week, the Treasury Bills (“T-Bills”) market continued its bearish
run, despite robust system liquidity as investors remained cautious in
anticipation of higher stop rates at the Primary Market Auction (“PMA”) slated
for Wednesday and possible Open Market Operations ("OMO") interventions
by the CBN. Consequently, average rate across tenors advanced 184bps to close
at 13.8% from 11.9% the previous week on the back of investor sell-offs on
short-term instruments, particularly the 27-Sep-18 maturity which spiked 7.6%
W-o-W to 14.0% from 6.5% the previous week. Rates across the medium-term
instruments (+1.3%) and long-term instruments (+1.1%) also advanced W-o-W on
account of sell-offs in 3-Jan-19 (+1.9%) and 21-Mar-19 (+1.3%) bills.
In line with our expectations, the CBN made a more aggressive move to mop-up
the buoyant system liquidity (N525.1bn long as at Monday), holding three
OMO auctions last week. At the first auction on Monday, the Apex bank offered a
total of N200.0bn for the 199-day maturity which was 68.7%
undersubscribed (N62.6bn subscribed vs. N200.0bn offered) and a
meagre 10.9% total sale. However, there was no subscription for the 73 and
136-day tenors due to similar tenors with more attractive rates in the
secondary T-Bills market.
Following the weak demand at the last OMO auction, the CBN hiked the stop rate
on the 324-day bill on Tuesday. Consequently, the total N250.0bn offered
was 44.2% subscribed (121 days – N4.0bn subscribed vs. N50.0bn
offered, 198 days - N9.4bn subscribed vs. N50.0bn offered and 324
days - N97.2bn subscribed vs. N150.0bn offered). However, the
121-day bill alone remained unallotted with the 198-day and 324-day recording
0.6% and 54.4% allotment respectively. Furthermore, at the final intervention
of the week on Thursday, the total N350.0bn offered was N109.0bn
subscribed but with no sale across the 119, 189 and 364-day tenors due to
higher stop rates quoted by investors.
At the PMA on Wednesday, the CBN maintained the stop rates on its short and
mid-term instruments at 11.0% and 12.3% respectively while the 364-day
instrument inched to 13.5% from 13.2%. In addition, the auction witnessed
strong demand of N213.2bn above the N136.3bn offered especially
on the mid and long-term bills which were oversubscribed at 1.9x and 1.6x
respectively.
Please see detailed results
below:
Auction Date |
12-Sep-2018 |
12-Sep-2018 |
12-Sep-2018 |
Allotment /
Issue Date |
13-Sep-2018 |
13-Sep-2018 |
13-Sep-2018 |
Tenor |
(91-Day) |
(182-Day) |
(364-Day) |
Offer Amount ( |
6,217,066,000 |
4,002,523,000 |
126,085,442,000 |
Total Subscription ( |
3,382,186,000 |
7,648,976,000 |
202,336,377,000 |
Allotment ( |
2,650,808,000 |
4,002,523,000 |
129,651,700,000 |
Range of Bid Rates
(%): |
11.0000-14.0000 |
12.0000-13.1970 |
11.0000-20.0000 |
Stop Rates (%): |
11.0000 |
12.3000 |
13.5000 |
Allotment Ratio |
0.4x |
1.0x |
1.0x |
Subscription Ratio |
0.5x |
1.9x |
1.6x |
Going into the week, we expect some buying interest to return to the secondary
market as investors take advantage of the attractive rates, particularly on the
short-term instruments. Also, we anticipate that the Apex bank will remain
aggressive in mopping up the buoyant system liquidity through its regular
interventions, as N400.7bn worth of T-Bills and OMO maturities are
expected to hit the system this week, further boosting liquidity (N287.4bn
long as at Friday). Furthermore, with the Apex bank offering a total of N178.4bn
across the 91, 182 and 364-days tenors at the PMA slated for Wednesday, we
advise investors to take advantage of the generally improved rates especially
the short-term bills.
Please see indicative
T-Bills rates for today below:
Maturity |
Tenor (Days) |
Rate (%) p.a. |
Yield (%) p.a. |
01-Nov-18 |
45 |
10.60 |
10.74 |
27-Dec-18 |
101 |
11.70 |
12.09 |
24-Jan-19 |
129 |
12.46 |
13.03 |
18-Jul-19 |
304 |
12.00 |
13.33 |
OMO Auction |
c.200 |
11.50 |
12.27 |
OMO Auction |
c.300 |
12.20 |
13.68 |
Rates are valid till 1:45pm today
*Please note that the
minimum subscription for T-Bills is N100,000.00
FGN Bonds Market Update: Average Yield
Advanced 42bps W-o-W to Cross the 15.0% Psychological Line
The bonds market performance was largely bearish as investor sell-offs
persisted at the shorter end of the curve, particularly the 12-Jul-2019
(+1.01%), 16-Aug-2019 (+1.04%) and 20-Sep-2019 (+1.03%) maturities. In
addition, weak buying interest was recorded at the longer end of the curve,
especially in the 23-Feb-2023 (-0.16%) instrument. As a result, average yields
across tenors inched +42bps W-o-W to close at 15.1% from 14.7%.
Please see indicative bond
rates for today below:
Bond |
Tenor (Years) |
Yield (%) |
Coupon (%) |
Implied Price (N) |
Feb-20 |
2 |
13.85 |
15.54 |
102.05 |
Jul-21 |
3 |
15.15 |
14.50 |
98.49 |
Jan-22 |
4 |
14.80 |
16.39 |
104.03 |
Mar-24 |
6 |
15.00 |
14.20 |
97.07 |
Jan-26 |
8 |
15.10 |
12.50 |
88.64 |
Mar-27 |
9 |
15.08 |
16.29 |
105.69 |
Jul-34 |
16 |
14.80 |
12.15 |
83.91 |
Mar-36 |
18 |
14.90 |
12.40 |
84.58 |
Apr-37 |
19 |
14.80 |
16.25 |
109.07 |
Rates are valid till 1:45pm today
*Please note that the minimum subscription for Bonds is N20,000,000.00
This week, we expect some improvements in buying interest especially at
the shorter-end of the curve due to the attractive rates. Notwithstanding,
investors are expected to remain cautious on continued weak sentiments on
Emerging Markets.
Related News
1.
Average T-bills Yield Rose Significantly
by 208bps to Close the Week at 14.43%
2.
Markets Take a Breather as CBN Pauses on OMO
3.
Market Players Selloff Bills above 14% as CBN extends OMO
offer to the 1-year
4.
Yield Curve Nears Inversion as DMO Clears 1-Year Bill at
15.60% eff. Yield
5.
Market Players Risk off T-bills, as CBN Elongates OMO
Tenor above the 300day Mark
6.
Ahead of Next T-bills Auction Scheduled for 12th Sept,
2018
7.
Market Players Demand Higher Rates for OMO, as PMA
Approaches
8.
CBN Raises OMO Stop Rates, Succumbs to Investor Pressure
PMA Holds this Wednesday
9.
Average T-Bills Yield Rose by 15bps to Close the Week at
12.36%
10. Yields Trend Higher following Hike in CBN OMO Stop Rate
11.
Central Bank makes a U-turn, raises rate to 12.50% for
the 182days OMO Bills
12. System Liquidity support bullish interests in the Fixed
Income Markets