Buying Interest Pressures Rates Lower as Average Rate Declines 1.6% WoW

Proshare

Monday, September 24, 2018 / 01:20 PM / Afrinvest Research 

The bearish trend was reversed last week as demand returned to the secondary Treasury Bills (“T-Bills”) market on the back of persistent buoyant system liquidity and the reduction of OMO mop ups by the CBN. Thus, average rate across tenors contracted (1.6%) to close at 12.2% from 13.8% the previous week as investors’ buying interest resurfaced especially at the shorter-end of the curve which declined 238bps W-o-W with most buying interest witnessed in the 11-Oct-18 bill (-5.7%W-o-W). 

Similarly, rates across the mid-term instruments retreated 1.0% W-o-W to 12.6% while rates on the long term bills declined marginally by 0.3% W-o-W to 13.4% from 13.7% as investors anticipated better rates (last stop rate 13.5%) at the Primary Market Auction (“PMA”).

At the PMA on Wednesday, the CBN maintained stop rate at 11.0% on the 91-day while the 182-day and 364-day instrument slid from 12.3% to 12.2% and 13.5% to 13.475% respectively. Additionally, the auction recorded strong demand across all tenors (91 days – 1.6x, 182 days – 1.4x and 364 days – 2.5x oversubscribed) as the Apex bank’s N182.2bn total offering was N440.0bn oversubscribed majorly at the long-term instruments at 2.5x. 

Please see details of the PMA results below:

Auction Date

19-Sep-18

19-Sep-18

19-Sep-18

Allotment / Issue Date

20-Sep-18

20-Sep-18

20-Sep-18

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer Amount(N)

5,395,696,000

8,385,196,000

168,361,351,000

Total Subscription (N)

8,601,351,000

11,858,049,000

419,491,647,000

Allotment (N)

5,395,696,000

8,385,196,000

168,361,351,000

Range of Bid Rates (%):

11.0000 – 13.4000

11.9500 – 14.4000

13.0000 – 15.5582

Stop Rates (%):

11.000

12.200

13.475

Subscription Ratio:

1.6x

1.4x

2.5x

Allotment Ratio:

1.0x

1.0x

1.0x


On Thursday, the CBN conducted its Open Market Operations (“OMO”) auction, offering a total of N550.0bn across the 91, 182 and 364-day maturities respectively. While demand at the short and mid-tenored instruments were low (undersubscribed by 99.0% and 74.3% respectively), the long-term instrument was 27.8% oversubscribed (N383.4bn subscribed vs. N300.0bn offered). Consequently, the 91-day bill was not sold while the 182 and 364-day instruments witnessed
20.7% and 102.2% sale respectively.

Please see indicative T-Bills rates for today below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

25-Oct-18

31

8.70

8.76

20-Dec-18

87

10.20

10.45

03-Jan-19

101

11.00

11.35

07-Feb-19

136

11.51

12.03

OMO Auction

c.200

11.50

12.27

OMO Auction

c.300

12.20

13.68

Rates are valid till 1.45pm today (24-Sep-18)

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

 

This week, the inflow of OMO maturity worth N260.8bn as well as FAAC will hit the system boosting liquidity levels (opening this week N180.0bn long). Although, we anticipate the CBN to actively mop-up excess liquidity through its customary interventions, we expect to see more buying activity in the market due to the buoyant level of liquidity, thus we envisage that rates will trend lower.


FGN Bonds Market Update: Local Investors Buoy Demand as Average Yield Declines -0.7%W-o-W


Last week, local investors’ demand buoyed the bullish performance recorded in the Bonds market as investors focused on the shorter end of the curve, particularly the 19-Mar-2019 (-96bps) and 12-Apr-2019 (-88bps) maturities. Consequently, average yields declined -0.7% W-o-W to 14.3% from
15.0% the previous week.

Please see indicative bond rates for today below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

           13.50

            15.54

                  102.46

Jul-21

3

           15.05

            14.50

                    98.72

Jan-22

4

           14.45

            16.39

                  104.94

Mar-24

6

           14.80

            14.20

                    97.79

Jan-26

8

           15.10

            12.50

                    88.66

Mar-27

9

           15.05

            16.29

                  105.82

Jul-34

16

           14.80

            12.15

                    83.92

Mar-36

18

           14.90

            12.40

                    84.57

Apr-37

19

           14.80

            16.25

                  109.07

Rate are valid till 1.45pm today (24-Sep-18)

*Please note that the minimum subscription for Bonds is N20,000,000.00

 

Going into the week, we expect demand to wane as investors interest reduce due to tightened rates and an upcoming bonds auction, while negative sentiments towards Emerging markets persist.

Please see details of the Bonds Auction below:

Instruments

12.75% FGN APR 2023
 (Re-opening)

13.52% FGN MAR 2025
  (Re-opening)

13.98% FGN FEB 2028
(Re-opening)

Tenor

5-year

7-year

10-year

Range of Amount on Offer (N’bn)

20-30

20-30

35-45

Last Auction Marginal Rates

14.3900%

14.6000%

14.6900%

 

 

Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Bond Yields Compress Further on Renewed Local Demand

2.      Resurgent Interests in EM Bolsters Nigerian Eurobonds to 6-Week High

3.      Market players Oversubscribe 1yr PMA Bill by c.250%

4.      Bond Yields Weaken Following Renewed Local Supply on the Long End

5.      Average T-Bills Rate Rose 184bps WoW Amidst Buoyant System Liquidity

6.      Bond Yields Moderate Further Amid Tighter Supply

7.      Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

8.     Markets Take a Breather as CBN Pauses on OMO

9.      Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year

10.  Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

11.   Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

12.  Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

13.  Market Players Demand Higher Rates for OMO, as PMA Approaches

 

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