Average Yield Moderates to 13.3% on Absence of OMO Auctions

Proshare

Tuesday, April 23, 2019 03:15 PM / Afrinvest Research

 

Last week, the T-Bills secondary market sustained its bullish run for the third consecutive trading session amidst the absence of OMO auctions throughout the four trading sessions. Consequently, average yields across all tenors shed 10bps W-o-W to settle at13.3%from 13.4% the previous week Major buying interests were recorded in the 01-Aug-19 (-84bps), 13-Jun-19 (-64bps) and 17-Oct-19 (-45bps).

 

At the Primary Market Auction (“PMA”) last Wednesday, the Apex bank offered N58.5bn worth of T-bills which witnessed a subscription of N223.6bn, translating to a 3.8x bid-to-cover ratio (vs. 2.1x at the previous auction which held on  03-Apr-19). The 364-Day instrument witnessed the highest demand (6.9x bid-to-cover ratio) due to investors’ concerns of a near-term moderation in T-Bills yields amidst the absence of OMO auctions all through the week.

 

Consequently, stop rates across the 91- 182- and 364-Day bills declined by 14 bps, 10bps and 11bps respectively.

 

Please see a detailed summary in the table below:

Auction Date

17-Apr-19

17-Apr-19

17-Apr-19

Allotment / Issue Date

18-Apr-19

18-Apr-19

18-Apr-19

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

5,849,034,000

 29,245,168,000

23,396,134,000

Total Subscription (N)

23,968,157,000

 37,686,503,000

161,958,918,000

Allotment (N)

5,849,034,000

 3,500,000,000

49,141,302,000

Range of Bid Rates (%)

9.7000-13.5000

11.8000-14.0000

11.8500-15.0000

Stop Rates (%)

10.1499

12.5000

12.7400

Previous Stop Rates (%)

10.2900

12.6000

12.8500

Bid-to-Cover Ratio

4.1x

1.3x

6.9x

Allotment Ratio

1.0x

0.1x

2.1x

 

Going into the week, we expect the end of the Easter break to usher in a tide of renewed interests following expected inflows from matured OMO bills and bond coupon payments worth N46.3bn and N8.2bn respectively. We expect the CBN’s OMO Auction to remain scanty due to the low value of maturities.

 

Notwithstanding, investors are advised to take advantage of medium to long-term maturities with high yield in the secondary market in addition to OMO offerings expected during the week.

 

Please see below T-Bills indicative rates for today:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

30-May-19

37

9.50

9.59

06-Jun-19

44

9.70

10.12

08-Aug-19

107

10.60

10.94

12-Sep-19

142

12.00

12.59

10-Oct-19

170

12.10

12.82

14-Nov-19

205

12.20

13.10

12-Dec-19

233

12.20

13.23

19-Dec-19

240

12.30

13.38

30-Jan-20

282

12.40

13.71

27-Feb-20

310

12.10

13.49

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 Contract 20bps W-o-W on Improved Demand; Bond Primary Auction Holds This Wednesday

In the Bond market, the bearish sentiments from the previous week reversed owing to the improved domestic demand that was witnessed across the yield curve. Thus, average yields declined 20bps W-o-W to settle at 14.0%from 14.2% the previous week. Major buying interests were recorded on the 17-May-19 (-75bps), 20-Sept-19 (-55bps) and 16-Aug-19 (-0.52bps) maturities.

 

This Wednesday, the DMO is expected to offer N100.0bn at the FGN Bond auction- comprising N40.0bn of the APR-2023 (reopening), N40.0bn of the APR-2029 (New 10-Year Issue), and N20.0bn of the APR 2049 (New 30 Year Issue) –to investors..

 

Please see details of this week’s auction below:

BOND

12.75% FGN APR 2023          (Re-opening)

NEW FGN APR 2029 (10-YEAR)

NEW FGN APR 2049 (30- YEAR)

Term-To-Maturity

4 Years

10 Years

30 Years

Amount on Offer

N35.0bn- N45.0bn

N35.0bn- N45.0bn

N15.0bn- N25.0bn

 

We expect the momentum from last week trading sessions to be sustained, albeit at a slower pace, as investors anticipate the outcome of the bond auction on Wednesday. Furthermore, investors are advised to take advantage of bonds with attractive yields and trading at a discount as well as primary offers in the FGN Bond spaces.

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

1

14.25

14.50

100.40

Jan-22

2

14.10

16.39

105.03

Apr-23

3

14.33

12.75

95.30

Mar-24

5

13.95

14.20

100.82

Mar-25

7

14.15

13.53

97.54

Jan-26

8

14.38

12.50

91.99

Mar-27

9

14.33

16.29

92.03

Feb-28

15

14.46

13.98

97.59

Jul-34

17

14.35

12.15

86.47

Mar-36

18

14.46

12.40

87.07

Apr-37

19

14.39

16.25

111.86

 

Proshare Nigeria Pvt. Ltd.


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