Liquidity Levels May Drive Rates Southwards Amid PMA This Week

Proshare

Monday, July 30, 2018 2:50PM / Afrinvest 

The Treasury Bills (“T-Bills”) market took a slightly bearish turn last week as average rate stood at 11.4% merely inching 6bps higher W-o-W. Short term bills advanced 20bps W-o-W to 11.0% on the back of sell trades on October bills while medium term instruments closed flat due to investors’ shift to OMO, offering higher yield. On the flipside, buying interest on 21-Mar-19 (up 1.1% W-o-W) drove rates 10 bps lower at the long end of the curve.

Trading last week in the secondary market started off on a cautious note due to the MPC meeting outcome expectations as well as the unexpected OMO Auction conducted by the CBN last Tuesday mopping up N235.9bn inflows Bond coupon payments.

However, the market turned slightly bearish on Wednesday as investors needed to free up liquidity ahead of OMO Auction on Thursday where the Apex bank sold an additional N348.6bn leaving liquidity level at negative N75.9bn as at close of market on Friday.

Please find below indicative rates for today: 

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

20-Sep-18

59

8.50

8.62

8-Nov-18

108

9.80

10.09

13-Dec-18

143

10.80

11.28

10-Jan-19

171

10.90

11.49

14-Feb-19

206

11.10

11.85

OMO Auction

200 - 300

11.30

12.05 - 12.46

18-Jul-19

360

10.70

11.96

Rates are valid till 1:45pm today (30-Jul-18)

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

This week, FAAC inflows and N540.0bn worth of matured bills (N215.6 PMA and N324.3 OMO) are expected to hit the system. This is expected to be mopped up by the PMA scheduled to hold on Wednesday (details below) and possible OMO auctions. In addition, we expect FGN Bond coupon inflows of N87.1bn to increase liquidity levels.

Tenor

91-day

182-day

364-day

Last Stop Rate (%) p.a.

10.00

10.50

11.49


Consequently, we anticipate rates to trend southwards this week due to high demand stoked by higher liquidity. Investors are therefore advised to watch keenly for opportunities in primary market issues.

FGN Bonds Market Update: Bearish Sentiments Drive Average Yield 4bps Higher

Average yield on benchmark bonds advanced 4bps marginally W-o-W to reverse the mild bullish run last week. Market players however showed buying interest in medium-term bonds dipping 10bps towards the end of the week. On the flipside, the short-term instruments advanced 34bps due to weaker demand while long term bonds stood at an average yield of 14.1% W-o-W.

Please see results of the Bond Auction last week below:

Bond

12.75% FGN APR 2023

13.53% FGN MAR 2025

13.98% FGN FEB 2028

Tenor

5-Year

7-Year

10-Year

Amount Offered (N'bn)

25.0

25.0

40.0

Total Bids

14

15

83

Successful Bids

12

14

75

Subscription (N'bn)

12.9

13.6

50.5

Amount Allotted (N'bn)

8.9

11.6

46.4

Range of Bids (%)

13.3500 - 13.9000

12.8000 - 14.4900

12.5000 - 14.6490

Marginal Rates (%)

13.69

14.00

14.30

Subscription Ratio

0.5x

0.5x

1.3x

Allotment Ratio

0.7x

0.9x

0.9x


This week, we believe yields would remain around current levels due to the weak sentiment in the market.

Please see below indicative bond rates for today:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

           12.75

            15.54

                  103.85

Jul-21

3

           13.30

            14.50

                  102.89

Jan-22

4

           13.15

            16.39

                  108.91

Mar-24

6

           13.50

            14.20

                  102.66

Jan-26

8

           13.95

            12.50

                    93.37

Mar-27

9

           13.80

            16.29

                  112.31

Jul-34

16

           14.10

            12.15

                    87.73

Mar-36

18

           14.05

            12.40

                    89.27

Apr-37

19

           14.08

            16.25

                  114.14

 

Rates are valid till 1:45pm today (30-Jul-18)

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

 


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