Strong Buying Interest Depressed Average T-Bills Yield Further To 12.9% As OMO Stop Rates Dip

Proshare

Monday, May 13, 2019  01:07PM / By Afrinvest Research

 

Activities in the Treasury Bills (“T-Bills”) secondary market sustained a bullish trend on the back of bolstered system liquidity from FAAC injections at the start of the week as well as increased demand from offshore investors towards the end of the week. Thus, average yield contracted to settle at 12.9% W-o-W, moving 21bps southward. Demand was largely witnessed in the medium- and long-term bills causing yields to tank 30bps W-o-W apiece. On the flip side, the short-term bills advanced 26bps W-o-W as selloffs were experienced especially on the 6-Jun-19 (+1.75%) and 13-Jun-19 (+1.04%) bills. 

The Apex bank resumed its liquidity mop up last week offering a total of N570.0bn in three OMO auctions with a total bid-to-cover-ratio of 2.0x, 0.6x and 2.0x on the short-, medium- and long-term offerings. Thus, most demand was witnessed on the long-term bills despite rate moderations. At the first auction on Monday, N300.0bn was offered across 108-,199- and 353-Day tenors with a total bid-to cover ratio of 1.4x, while on Tuesday, N130.0bn was auctioned across 93-,205- and 331-Day tenors and with a total bid-to-cover ratio of 1.3x. 

Finally, at Thursday’s auction a total sum of N140.0bn was offered across 91-,175-and 336-Day tenors respectively which recorded (2.3x) oversubscription on long term bills while the short and medium term were under subscribed by (2.0x) and (1.0x) respectively. Overall, the stop rates declined consecutively at each auction this week due to the high level of demand.  

This week, the Apex bank is scheduled to roll over maturing bills worth N33.8bn through the Primary Market Auction (“PMA”) across the 91 (N3.4bn), 182 (N16.9bn) and 364-Day (N13.5bn) tenors.

 

TENOR

91- DAY

182 - DAY

364 - DAY 

Offer Amount

3,384,180,000

16,920,900,000

13,536,720 ,000

Last Stop Rate

10.00%

12.49%

12.77%

Expected Stop Rate Range (%)

10.05% - 10.15%

12.40% - 12.50%

12.60% - 12.80%

 

Please see indicative secondary market T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

1-Aug-19

80

8.8

8.97

5-Sep-19

115

10.8

11.18

3-Oct-19

143

11.6

12.15

14-Nov-19

185

11.61

12.34

5-Dec-19

206

12

12.87

2-Jan-20

234

11.97

12.96

20-Feb-20

283

12

13.23

OMO Auction

c.100

10

10.28

OMO Auction

c.200

11.9

12.73

OMO Auction

c.300

12.2

13.56

 

Going into this week, we expect to see a boost in system liquidity (N446.3bn positive as at last Friday) on the back of T-bills and OMO maturities worth N33.8bn and N107.1bn respectively. In addition, the nomination of the CBN Governor, Mr Godwin Emefiele will be positive for the fixed income market as we expect continued FX stability at current levels in the short to medium term as well as guarantees the naira-settled OTC FX Futures will be sustained. 

Consequently, this will attract more FPIs into the fixed income market which may result to further moderation in yields. We also anticipate that the CBN will continue its excess liquidity mop-ups via OMO auctions which may relax yields across the curve. Investors are advised to take advantage of T-Bills with attractive yields as well as potential OMO bill offerings.

 

FGN Bonds Market Update: The Bulls take Centre Stage as Average Yield tanks marginally 20 bps W-o-W

 

The bond market sustained its bullish outlook as average yield trended 20bps W-o-W southward to settle at 14.1% W-o-W as the medium- and long-term instruments enjoyed significant buying interests. Consequently, high demand was witnessed on the 27-Apr-23 (-62bps) and18-Jul-34(-41bps) respectively. We believe sustained demand in the long-term instrument is buoyed by perceived clearer policy direction as the CBN governor recently got re-appointed for another tenure of 5 years in office. 

This week, we anticipate continued improvement in the bond market as investors take position on instruments with attractive yields. Investors are advised to continue cherry picking instruments with attractive yields.

 

Please see indicative bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

21-Jul

2

14.20

14.50

100.49

22-Jan

3

14.20

16.39

104.72

23-Apr

4

14.00

12.75

96.28

24-Mar

6

14.00

14.20

100.63

25-Mar

8

14.25

13.53

97.16

26-Jan

9

14.27

12.50

92.47

27-Mar

10

14.21

16.29

92.03

28-Feb

16

14.23

13.98

98.71

Jul-34

18

14.23

12.15

87.14

Mar-36

19

14.40

12.40

87.40

Apr-37

19

14.10

16.25

113.89




Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Bond Market Reacts Positively to CBN Governor Tenure Renewal

2.      NSE Lists NSP-SPV Powercorp Green Infrastructure Bonds

3.      Fixed Income Monthly Update April 2019 - Is This A Good Time To Test the Eurobond Waters?

4.      Average T-Bills Yield Closes Flat at 13.1%

5.      May 2019 FGN Savings Bonds Offer for Subscription

6.      Money Market Rate Fell Significantly As The OVN and OBB Fell To 5.93% and 5.29%

7.      Demand For Long Term Bonds Pressure Yields Marginally Lower

8.     Debut 30-Year FGN Bond Oversubscribed At April Auction

9.      CBN to Auction c.N110bn T-Bills upon Resumption from Break

10.  Average Money Market Rate Rose By 6.65% To Settle At 16.86%

11.   Average Yield Contracts to 13.1% Amidst Buying Interests; PMA Holds on Thursday

12.  Summary of April 2019 FGN Bond Auction Results

 

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP