Increased OMO Mop-Ups by CBN Drive T-Bills Average Yield up to 13.5% as PMA Holds this Wednesday

Proshare

Monday, March 11, 2019 01:19 PM / Afrinvest Research

 

The bullish sentiment in the Treasury Bills (“T-Bills”) secondary market was reversed last week (after two weeks) as the Apex bank increased its frequency of liquidity controls via Open Market Operation (“OMO”) auctions albeit offering only short- and mid-tenor bills. Consequently, average yield across tenors advanced 51bps W-o-W to 13.5% from 13.0% the previous week. 

Accordingly, the short- and medium-term instruments increased 101bps and 135bps W-o-W respectively following sell-offs as investors took position in bills offering higher yields at the OMO auctions. The long-term bill also advanced marginally 6bps W-o-W despite sustained demand witnessed for most part of the week. 

The CBN offered a total of N900.0bn at the OMO auctions conducted on all trading sessions last week save for Wednesday, and successfully mopped up approximately N809.0bn out of a 1.1x over-subscription of N945.3bn. In more details, the medium-term bill had more interest (1.4x bid-to-cover) as N800.8bn was subscribed, against N570.0bn offered. On the other hand, the short-term bill received mild attention with a total of N144.5bn subscription against N330.0bn offered, depicting a 0.4x ratio. 

This week, the Apex bank will conduct a Primary Market Auction (“PMA”) on Wednesday to roll over N89.5bn worth of T-Bills maturing on Thursday, across the 91- (N5.0bn), 182- (N14.0bn) and 364-day (N70.5bn) tenors.

 

Please see more details in table below:

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

5,000,000.00

14,002,523.00

70,501,216.00

Last Stop Rate

10.90%

13.01%

14.37%

Expected Stop Rate Range

10.50% - 10.99%

12.95%-13.20%

13.5%-13.90%

 

We expect this week’s PMA to witness strong demand, especially on the 364-Day instrument, hence we anticipate lower moderation in rates as witnessed in OMO auctions conducted last week. Additionally, we believe the CBN may continue the trend of regular liquidity mop ups (N26.4bn positive as at Friday last week) albeit at a slower pace and offering only short and medium bills. Thus, further raising demand for long-term bills. Investors are therefore advised to take full advantage of the primary offerings specifically the 364-day bill. The stop rate of the long- term bills at the PMA is expected to guide rates of similar bills in the secondary market.

 

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

 

Volume

02-May-19

52

8.50

8.60

 

01-Aug-19

143

10.10

10.52

 

12-Sep-19

185

12.20

13.00

 

31-Oct-19

234

12.55

13.65

 

09-Jan-20

304

12.40

13.84

 

20-Feb-20

346

12.10

13.67

 

27-Feb-20

353

12.60

14.35

N5m

OMO Auction

c.100

10.50

10.81

 

OMO Auction

c.200

12.40

12.84

 

OMO Auction

c.350

13.30

15.26

 

Rates are valid till 01:45pm today (11-Mar-19)
*Please note that the minimum subscription for T-Bills is N100,000.0
 
How to Fund?

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

For GT Bank users, please note that you can fund your account through your GT Bank Mobile Banking app or using the short-code below:

*737* 35 *amount*9054# (for example *737* 35 *25000* 9054#)


NOTE: Payment should ONLY be made to Afrinvest Securities Limited Client bank accounts

 

FGN Bonds Update: Slow-down in Offshore Demand and Profit Taking Raise Average Yield 30bps W-o-W

Last week, sell-offs across all tenors was witnessed in the FGN bonds space, as local investors booked profit and foreign inflows softened. Thus, average yield across FGN Bonds advanced 30bps W-o-W to close at 14.3% from 14.0% the previous week. The FGN 2028 Bonds witnessed most sell-offs up 45bps W-o-W. 

This week, we advise investors to take advantage of Bonds that declined last week and be guided by CBN’s primary market actions as further rate moderation may spur demand on short-term Bonds.

 

Please see indicative FGN bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jul-21

2

14.20

14.50

100.53

Jan-22

3

14.15

16.39

105.11

Mar-24

5

13.90

14.20

101.05

Jan-26

7

14.20

12.50

92.65

Mar-27

8

14.20

16.29

109.81

Feb-28

9

14.10

13.98

92.03

Jul-34

15

14.15

12.15

87.56

Mar-36

17

14.05

12.40

89.41

Apr-37

18

14.10

16.25

113.91

Rates are valid till 01:45pm today (11-Mar-19)
*Please note that the minimum subscription for Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


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