Sustained High Demand On Short-Term Bills Pressure Average Rates To 13.4% W-o-W

Proshare

Monday, January 28, 2019   04:45 PM / Afrinvest Research

 

In the Treasury Bills (“T-Bills”) secondary market last week, high demand for short- and medium-term bills pressured average rate across tenors by approximately 0.5% W-o-W to close at 13.4% from 13.8% the previous week, thus, sustaining the 3-week bullish run. At the short end (7-Day to 90-Day) of the curve, average rate declined the most, down 1.1% due to buying pressures on February/March maturities as some investors remain cautious of post-election dynamics. 

Similarly, average rate on medium term (91-Day to 182-Day) maturities also declined 0.4% on the back of buying interest, especially on the 06-Jun-19 maturity which declined the most (-2.2%) across the curve. At the long end (183-Day to 364-Day) of the curve, performance was however flat W-o-W as investors showed slight buying interest in September bills due to more attractive yields in long-term Open Market Operations (“OMO”) offers conducted on all trading sessions in the week by the Apex bank. 

In the OMO mop ups last week, a total of N1.4tn was offered as against N786.4bn mopped up (including N50.3bn in CBN’s special OMO) which shows a bid-cover ratio of 0.6x across all tenors. The short-term bills received the least attention as usual, with a bid-to cover ratio of 0.1x, due to more attractive rates on the secondary market, while the medium and long-term OMO offerings had 0.2x and 0.7x bid-to-cover ratios respectively. 

We believe the Apex bank will sustain its tight monetary stance through frequent OMO auctions to keep liquidity levels low (N323.5bn short as at last Friday). Going into the week, inflows from matured T-Bills worth N254.6bn is scheduled to hit the financial system on Thursday which we expect would be mopped up by a sizable OMO auction.

Investors are advised to take advantage of long-term maturities with high yield in the secondary market (especially October bills) that advanced last week, in addition to OMO offerings expected during the week.

 

Please see indicative T-Bills rates below (click here to view rates daily):

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

18-Apr-19

80

10.00

10.07

02-May-19

94

10.65

10.95

09-May-19

101

10.35

10.66

01-Aug-19

185

12.46

13.30

24-Oct-19

269

14.10

15.74

09-Jan-20

346

14.01

16.16

OMO Auction

c.200

12.50

13.55

OMO Auction

c.350

14.20

16.45

Rates are valid till 01:45pm today (28-Jan-19)

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

 

FGN Bonds Market Update; Flat Performance W-o-W Ahead of Bond Primary Auction on Wednesday

Last week, performance in the bonds market was flat with a slightly bearish bias due to mild sell-offs as market players anticipated the outcome of the MPC meeting on Tuesday and more importantly, the release of the Q1:2019 bond auction calendar (click here to view) which was published last Wednesday

Please see details of this week’s auction below:

BOND

12.75% FGN APR 2023 (Re-opening)

13.53% FGN MAR 2025 (Re-opening)

13.98% FGN FEB 2028 (Re-opening)

Term-To-Maturity

4 Years, 3 Months

6 Years, 2 Months

9 Years, 1 Month

Amount on Offer (Range)

N45.0bn -N55.0bn

N45.0bn -N55.0bn

N45.0bn -N55.0bn

 

We expect to see quiet trading sessions at the start of the week, ahead of the primary auction, investors are therefore advised to take advantage of the uptick in yields at the long-end of the curve as well as primary offers in the T-Bills and FGN Bond spaces

 

Please see indicative FGN Bond details below (click here to view daily):

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

14.90

15.54

100.58

Jul-21

3

15.22

14.50

98.55

Jan-22

4

14.76

16.39

103.84

Mar-24

6

14.80

14.20

97.85

Jan-26

8

15.09

12.50

89.04

Mar-27

9

15.00

16.29

105.89

Feb-28

10

15.25

13.98

92.03

Jul-34

16

15.05

12.15

82.76

Mar-36

18

15.15

12.40

83.29

Apr-37

19

15.10

16.25

107.01

Rates are valid till 01:45pm today (28-Jan-19)

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


Proshare Nigeria Pvt. Ltd.


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 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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