Average T-Bills Yield Contracts Marginally to 13.4% as CBN Resumes OMO Auctions

Proshare

Monday, April 08, 2019 02:29 PM / Afrinvest Research

 

The Treasury Bills (“T-Bills”) secondary market started the second quarter of 2019 on a bullish note largely buoyed by increased system liquidity from FAAC injection on the Friday of the previous week. However, the Central Bank of Nigeria (“CBN”) resumed its aggressive liquidity mop-ups through OMO auction after a surprise one-week break. Notwithstanding, average yields across all tenors shed marginally by 2bps W-o-W to settle at 13.4% from 13.6% the previous week. 

Demand was witnessed largely witnessed on the short- and medium-term bills causing yields to tank by 60bps and 20bps W-o-W respectively while the long-term bills advanced 11bps W-o-W as sell-offs were experienced on the 02-JAN-20 (+0.4%) and 23-JAN-20 (+0.2%) bills. 

Last week, the Apex bank offered a total of N350.0bn in two OMO auctions. At the first auction on Tuesday, N200.0bn was offered across 86-,153- and 364-Day bills while on Thursday, N150.0bn was offered across the 203- and 364-Day bills. Investors exhibited preference for longer tenor OMO instruments which recorded (2.1x) oversubscription while the short and medium term were under subscribed by (0.6x) and (0.1x) respectively. 

In addition, the CBN offered N95.7bn worth of bills across 91-, 182- and 364-Day tenors  at the Primary Market Auction (“PMA”) last week, with a total bid-to-cover ratio of 2.1x and stop rates inching 40bps and 51bps on medium- and long-term bills in tandem with the secondary market levels. Also, the bills were all oversubscribed however, only the long-term bill was fully allotted while the 91-Day and 182-Day bills received 0.5x and 0.8x allotment, respectively.

 

Please see a detailed summary in the table below:

Auction Date

3-Apr-19

3-Apr-19

3-Apr-19

Allotment / Issue Date

3-Apr-19

3-Apr-19

3-Apr-19

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

10,000,000,000

17,600,581,000

68,080,464,000

Total Subscription (N)

20,093,319,000

22,965,789,000

153,996,664,000

Allotment (N)

10,000,000,000

17,600,581,000

153,996,664,000

Range of Bid Rates (%)

10.0000-13.0000

11.8000-14.0000

11.7999-15.0000

Stop Rates (%)

10.29

12.60

12.85

Previous Stop Rates (%)

10.30

12.20

12.345

Bid-to-Cover Ratio

2.0x

1.3x

2.3x

Allotment Ratio

0.5x

0.8x

1.0x

 

Going into the week, we expect yields to remain high on the back of tightened liquidity and possibility of CBN mop-up exercise as OMO maturities worth N33.0bn is expected to hit the system t. Thus, investors are advised to take advantage of medium to long term bills with attractive yields.

 

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

30-May-19

52

9.50

9.63

06-Jun-19

59

10.00

10.16

18-Jul-19

101

9.50

9.76

01-Aug-19

115

10.40

10.75

15-Aug-19

129

11.00

11.44

29-Aug-19

143

11.70

12.26

03-Oct-19

178

12.40

13.20

14-Nov-19

220

12.40

13.40

19-Dec-19

255

12.45

13.64

30-Jan-20

297

12.30

13.67

20-Feb-20

318

12.30

13.78

 

 

FGN Bonds Market Update: The Bears take the Market as Average Yield Advances 14bps W-o-W

Performance in the bond market was bearish as average yield advanced 14bps to settle at 14.06% last week due to sell-offs experienced across all segments of the curve. However, it intensified in Jan-22, Feb - 28 and Nov-28 maturities whose yields advanced by 38bps,38bps and 37bps respectively. 

The Debt Management Office (DMO) released the FGN Bonds issuance calendar for the 2nd quarter 2019 where it announced to issue its first 30-year bond. 

We anticipate quiet trading session in the bond market as investors trade cautiously, awaiting clear policy directions.


Bond

Tenor

Yield (%)

Coupon Rate (%)

Implied Price

Jul-21

2

14.20

14.5000

100.50

Jan-22

3

14.00

16.3900

105.33

Apr-23

4

14.20

12.7500

95.62

Mar-24

6

14.15

14.2000

100.14

Mar-25

8

14.23

13.5300

97.23

Jan-26

9

14.25

12.5000

92.49

Mar-27

10

14.35

16.2884

108.98

Feb-28

16

14.56

13.9800

97.12

Jul-34

18

14.30

12.1493

86.73

Mar-36

19

14.37

12.4000

87.58

Apr-37

19

14.22

16.2499

113.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

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