Renewed Sell-Offs on T-Bills Push Yields 1.3% Higher WoW to 12.6% as PMA Holds Today

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Wednesday, August 14, 2019   /03:35PM / By Afrinvest Research / Header Image Credit: brecorder

 

Last week, the Treasury Bills (“T-Bills”) secondary market performance started on a mildly bullish note as market players showed interest on short-term bills in the first trading session due to the high system liquidity (N191.7bn positive) on Monday.

This was however short-lived, following demand on mid and long-term bills by Tuesday as investors awaited the Open Market Operations (“OMO”). On Thursday, the bullish trend reversed as offshore investors sold off big across all tenors pushing average yields up by 1.3%.  Thus, average yield on the short- medium- and long-term bills advanced 177bps, 159bps and 94bps respectively.

At the anticipated OMO auction on Wednesday, the Apex bank offered a total of N100.0bn across tenors (85, 183 and 344-Day). However, the CBN did not allot any sale on the mid-term bill despite 2.9x oversubscription while the short- and long-term bills were also both oversubscribed with bid-to-cover ratios 1.2x and 3.8x respectively.

Going into the 3-Day trading week (Due to the Sallah break), the CBN conducted a Primary Market Auction (“PMA”) today rolling over maturing bills worth N34.4bn across 91, 182 and 364-Day Tenors. We believe stop rates may tilt slightly northwards amid sell-offs witnessed in the secondary market last week.

 

Please see our expectations below:

Tenor

Amount on Offer

Previous Stop Rate (%)

Expected Stop Rate (%)

91-Day

      4,384,180,000.00

9.75

10.90 – 11.50

182-Day

   10,000,000,000.00

10.60

11.00 – 11.50

364-Day

   20,000,000,000.00

11.18

11.40 – 11.75

 

In addition, we advise investors to cherry-pick bills with attractive yields across the short-medium term space as the sell-offs may persist this week in the absence of OMO auction at attractive yields.

 

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

10-Oct-19

57

8.20

8.31

7-Nov-19

85

10.75

11.03

16-Jan-20

155

11.85

12.48

27-Feb-20

197

12.06

12.90

05-Mar-20

204

9.96

10.55

30-Apr-20

260

11.80

12.88

OMO Auction

c.100

10.00

10.20

OMO Auction

c.200

11.20

11.79

OMO Auction

c.350

11.50

12.93



FGN Bonds Market Update: Profit-Taking Drives Average Yield on FGN Bonds 40bps Up W-o-W

The bullish run in the bonds market was reversed last week due to profit-taking (especially on medium-term bonds that advanced in the previous week) by foreign players. Consequently, average yield increased 40bps to settle at 13.8% from 13.4% the previous week.

This week, inflow from expected coupon payment worth N60.4bn may spur buying interest however, due to the weak sentiment we expect a flattish performance in the bond space and advice investors to cautiously take position.


Please see indicative bond rates for today below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price

Jul-21

2

12.65

14.50

101.44

Jan-22

3

13.00

16.39

106.90

Apr-23

4

13.80

12.75

96.98

Mar-24

5

13.60

14.20

101.97

Mar-25

6

13.75

13.53

99.12

Jan-26

7

13.80

12.50

94.55

Mar-27

8

14.09

16.29

110.01

Feb-28

9

14.10

13.98

99.40

Jul-34

15

14.25

12.15

87.12

Mar-36

17

14.15

12.40

88.88

Apr-37

18

14.15

16.25

113.45

Apr-49

30

14.25

14.80

103.73

 


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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