Average Yields on Long Term Bills Remain at Over 17.0% on Aggressive OMO Mop Ups

Proshare

Monday, December 17, 2018 / 01:56 PM / Afrinvest Research

 

The bearish performance of the previous week filtered into last week as Treasury Bills (“T-Bills”) rates across tenors stood at 14.4% W-o-W due to the Apex bank’s continued Open Market Operations (“OMO”) mop ups leaving liquidity levels negative in the first three trading sessions last week. 

In addition, there were sell-offs in the secondary market especially at the short end of the curve thus, average rate on short-term bills advanced 20bps W-o-W from 14.4% to 14.6%. Medium term bills however witnessed buying interests due to more attractive yields relative to the previous week and consequently shed 52bps W-o-W from 13.8% to 13.3% last week while the average rate on long-term bills stood at 14.8% W-o-W. 

In terms of liquidity controls, the CBN continued its aggressive mop up actions conducting OMO auctions totalling N989.5bn on all trading days. Unsurprisingly, the short-term offerings received the least attention (0.0x undersubscribed) with N130.0bn offered against N0.1bn sold. In the same vein, the bid-to-cover ratio on medium- and long-term bills were also 0.3x and 0.8x respectively with N103.0bn sold out of N310.0bn offered on the medium-term instruments and N439.0bn sold out of N549.1bn offered (including special OMO sale of N39.5bn conducted on Friday) 

Consequent on the CBN mop ups, liquidity levels closed at N205.2bn negative as at Friday. This week, a total of N497.8bn is scheduled to hit the financial system on Thursday (Maturing T-Bills and OMO bills worth N25.4bn and N472.4bn respectively) thus, we believe the apex bank would sustain its strategy of frequent auctions. Investors are advised to take advantage of the OMO offerings as well as short-term bills that have advanced in the past weeks.

 

Please see below T-Bills indicative rates for today:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

24-Jan-19

38

12.35

12.51

28-Feb-19

73

12.90

13.24

02-May-19

136

11.96

12.52

13-Jun-19

178

12.50

13.31

29-Aug-19

255

13.40

14.78

17-Oct-19

304

14.01

15.86

OMO Auction

c.200

12.50

13.55

OMO Auction

c.350

14.20

16.45

 

FGN Bonds Market Update: Flattish Performance on Benchmark Bonds

In the FGN Bonds space, performance was flat as average rate on benchmark instruments declined marginally by 4bps to close at 15.5% on Friday. The frequent attractive long-term OMO bills offered by the CBN also weighed on performance at the short end of the curve. 

This week, we expect continued sell-offs on short-term bonds and believe investors would watch market performance ahead of the forthcoming FGN Bond auction.

 

Please see below indicative FGN Bond rates for today:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

14.85

15.54

100.65

Jul-21

3

15.43

14.50

98.05

Jan-22

4

14.85

16.39

103.68

Mar-24

6

15.06

14.20

96.89

Jan-26

8

15.60

12.50

86.94

Mar-27

9

15.60

16.29

103.07

Feb-28

10

15.76

13.98

92.03

Jul-34

16

15.57

12.15

80.13

Mar-36

18

15.53

12.40

81.31

Apr-37

19

15.42

16.25

104.96

 

 

Proshare Nigeria Pvt. Ltd.


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