Average Yield Contracts to 13.1% Amidst Buying Interests; PMA Holds on Thursday

Proshare

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 (N)

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


Proshare Nigeria Pvt. Ltd.

 

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


Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP