Buoyant Liquidity Level Spurs Buying Interest as Average Yield Compresses to 13.2%WoW

Proshare

Monday, February 04, 2019    01:35PM / Afrinvest Research

 

The Treasury bills (’’T-Bills’’) secondary market sustained its bullish run last week on the back of the buoyant system liquidity – N680.0bn long as at Thursday largely due to OMO and T-Bills maturities (N445.5bn) as well as FAAC allocations (N310.0bn). As a result, average rate across all tenors shed 15bps W-o-W to close at 13.2% on Friday. Yields on the shorter end of the curve particularly the 21-Feb-19 (-147bps) and 28-Feb-19 (-249bps) maturities declined significantly following substantial demand by investors, similarly, yields compressed at the medium and long-end of the curve – 20-Jun-19 (-91bps) and 12-Dec (-22bps).

 

The CBN conducted OMO auctions on 3 trading sessions offering a total of N850.0bn (including a N50.0bn special OMO sale on Thursday) which met a total subscription of N585.2bn. Interestingly, the short-term maturity had a bid-to-cover ratio of 1.1x following an over-subscription at Thursday’s auction (N50.0bn offer vs. N83.0bn subscription) due to its more attractive yield (+0.4bps) compared to short-term secondary market bills. The long-term bill had a bid-to-cover ratio of 0.8x (N480.0bn offer vs. N374.3bn subscription) while the medium-term bill was the least subscribed to with a bid-to-cover ratio of 0.3x (N230.0bn offer vs. N65.1bn subscription).

 

At the Primary Market Auction (‘’PMA’’) on Wednesday, the CBN offered a total of N274.8bn across the 91-day, 182-day and 364-day tenors. This offer was met with a total subscription of N323.8bn indicating a bid-to-cover ratio of 1.2x.

 

Please see allotment details below:

Auction Date

30-Jan-19

30-Jan-19

30-Jan-19

Allotment / Issue Date

31-Jan-19

31-Jan-19

31-Jan-19

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer Amount (N)

28,018,956,000

69,565,347,000

177,219,063,000

Total Subscription (N)

41,045,970,000

68,419,520.000

214,384,880.00

Allotment (N)

28,018,956,000

58,684,520.00

167,932,670.00

Range of Bid Rates (%):

10.8500 - 12.0000

12.8500 - 14.5000

14.3000 – 18.0000

Stop Rates (%):

11.0000

13.5000

15.0000

Previous Stop Rates (%):

11.0000

13.1000

15.0000

Bid-To-Cover Ratio:

1.5x

1.0x

1.2x

Allotment Ratio:

0.7x

0.8x

0.8x

 

Going into the week, we expect to see a sustained OMO mop-ups by the Apex bank as inflow from OMO maturities worth N315.6bn is expected to buoy system liquidity. Although we expect performance to be largely bullish in the near term stemming from a system liquidity boost, investors are advised to position in attractive OMO bills (short and long-term maturities) as well as selected secondary market bills.     

 

Please see indicative T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

14-Feb-19

10

9.00

9.02

14-Mar-19

38

9.70

9.80

02-May-19

87

10.00

10.24

16-May-19

101

9.50

9.76

01-Aug-19

178

12.40

13.20

24-Oct-19

262

13.85

15.38

12-Dec-19

321

14.06

15.97

09-Jan-20

339

13.96

16.04

OMO Auction

c.100

10.70

11.03

OMO Auction

c.200

12.50

13.55

OMO Auction

c.350

14.20

16.45

Rates are valid till 01:45pm today (04-Feb-19)


*Please note that the minimum subscription for T-Bills is N100,000.00

Kindly fund your Afrinvest in-house account “instantly” right from your online banking platform through NIBBS E-Bills (Read FAQs). The banks currently enabled are Guaranty Trust Bank, Ecobank, First Bank, Diamond Bank, Stanbic IBTC, Wema Bank and Zenith Bank

FGN Bonds Market Update: Bullish Sentiments Dominate Bonds Market

Last week, the bonds market reversed its bearish trend following buying interests particularly by investors with lost bids at the bonds auction on Wednesday. As a result, average yields declined 23bps W-o-W to 14.9% on Friday, crossing the 15% psychological line. The short-end of the curve witnessed a rally as more investors positioned in the 22-Mar-19 (-197bps), 12-Apr-19 (-143bps) and 17-May-19(-81bps) instruments attributable to anticipated rise in yields ahead of the general elections and handover period.

On Wednesday, the Debt Management Office (‘’DMO’’) conducted its first bond auction for the year offering N50.0bn apiece across the 5, 7 and 10-year bonds. While the 5 and 7-year instruments were undersubscribed, the 10-year instrument was 3.0x oversubscribed.

 

Please see detailed bond results below:

 

12.75% FGN APR 2023

13.53% FGN MAR 2025

13.98% FGN FEB 2028

Auction Date:

January 30, 2019

January 30, 2019

January 30, 2019

Tenors:

5-Year

7-Year

10-Year

Term-To-Maturity:

4 Years, 3 Months

6 Years, 2 Months

9 Years, 1 Month

Amount Offered:

N50.00 billion

N50.00 billion

N50.00 billion

Subscription:

N16.57 billion

N31.25 billion

N149.27 billion

Amount Allotted:

N5.85 billion

N20.10 billion

N91.04 billion

Range of Bids:

14.8000% - 16.2500%

15.0000% - 16.3000%

13.0000% - 16.4500%

Stop Rates:

15.2000%

15.2500%

15.3500%

Previous Stop Rates:

15.2500%

15.5000%

15.5000%

Bid to Cover Ratio:

0.3x

0.6x

3.0x

Allotment Ratio:

0.4x

0.6x

0.6x

 

Investors are advised to cherry pick and take position in bonds trading at a discount and with attractive yields across the curve.

 

Please see below indicative Bonds rates for today:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

14.20

15.54

101.22

Jul-21

3

14.60

14.50

99.78

Jan-22

4

14.20

16.39

105.16

Mar-24

6

14.25

14.20

99.78

Jan-26

8

14.71

12.50

90.55

Mar-27

9

14.88

16.29

106.47

Feb-28

10

15.00

13.98

92.03

Jul-34

16

14.58

12.15

85.21

Mar-36

18

14.75

12.40

85.42

Apr-37

19

14.75

16.25

109.34

*Please note rates are valid till 1:45pm today (04-Feb-19) 

*Minimum amount for FGN Bonds is N20,000,000


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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