T- Bills Market Reverses Bullish Run as PMA Holds Tomorrow

Proshare

Tuesday, October 02, 2018 / 01:32 PM / Afrinvest Research

 

The Nigerian Treasury Bills (“T-Bills”) market reversed prior week’s bullish performance as average rate across tenors closed higher by 0.2% W-o-W to settle at 12.5% on Friday. Investors sold off short term instruments particularly 11-Oct-18 (+1.9%) and 18-Oct-18 (+1.6%). The long-term bills also witnessed sell pressures as investors sold off some positions in 1-Aug-19 and 18-Jul-19 bills with rates on both instruments inching higher by 4bps and 3bps respectively. On the flip side, medium term instruments recorded a bullish performance as average rates slid 11bps with buying interest recorded in 3-Jan-19 (-0.5%) and 17-Jan-19 (-0.4%). 

Noteworthy to mention is the decision of the Monetary Policy Committee (“MPC”) to hold its key policy rate at 14.0% during its last meeting. That said, following sell-offs in the first 3 trading days, buying interesting resurfaced on Thursday as average rate edged lower 0.1%. The CBN meanwhile did not conduct any Open Market Operation (OMO) auction last week despite buoyant system liquidity at N581.6bn long bolstered by OMO maturity repayment of N260.8bn on Thursday. This may be attributed to CBN’s decision to play less aggressively as portfolio investors wound up their books for the 3rd quarter. 

This week, the CBN will be conducting a Primary Market Auction (“PMA”) to rollover maturing bills worth N133.5bn. The table below summarises details of the auction as well as expected stop rate range:


Tenor

91-Day

182-day

364-Day

Amount on Offer

N9.5bn

N17.6bn

N106.4bn

Last Stop Rate

11.0000%

12.2000%

13.4750%

Expected Stop Rate

11.00%-11.20%

12.30%-12.50%

13.30%-13.50%

 

Going into the week, T-Bills and OMO maturities of N133.5bn and N268.2bn are expected to hit the system coupled with FAAC inflows that came in close of Friday, thus we expect liquidity level to remain high. While a PMA will be conducted by the Apex bank to rollover the maturing bills, we expect more OMO auctions this week as CBN looks to mop up excessive liquidity. Nevertheless, we expect rates to trend southwards on sustained buying interest in the secondary market due to high level of system liquidity.

 

Please see below rates for today:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

01-Nov-18

30

9.30

9.37

29-Nov-18

58

10.00

10.16

10-Jan-19

100

10.70

11.02

28-Feb-19

149

11.56

12.13

OMO Auction

c.200

11.50

12.27

OMO Auction

c.300

12.20

13.68

 

Bonds Market Update: Local Bonds Market Extends Bullish Run on Increased Buying Enthusiasm

The Local bonds market extended its bullish run into the second consecutive week as average yield slid lower by 0.1% W-o-W to 14.5%. The market witnessed increased appetite for Nigerian bonds particularly among domestic investors on the back of what proved to be the strongest Bond auction in 8 months with the DMO selling N96.7bn as against N39.7bn in August (+143.6%) and N66.9bn in July (+44.5%). Below are full details of the Bond auction held last week:

 

 

12.75% FGN APR 2023

13.53% FGN MAR 2025

13.98% FGN FEB 2028

Tenor

5-Year

7-Year

10-Year

Amount Offered

N25.0bn

N25.0bn

N40.0bn

Total Subscription

N20.7bn

N12.5bn

N125.4bn

Amount Allotted

N17.5bn

N7.4bn

N71.9bn

Range of Bids

14.7400%-16.1000%

14.0000%-16.0000%

12.9800%-16.5000%

Marginal Rates

15.0000%

15.1500%

15.2459%

Bid to Cover Ratio

0.8x

0.5x

3.1x

Allotment Ratio

0.7x

0.3x

1.8x

     

This week, we anticipate the bullish run to continue as domestic investors take position in instruments with attractive yields.

See below bond rates for today: 

 

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

           13.20

            15.54

                  102.79

Jul-21

3

           14.50

            14.50

                    99.94

Jan-22

4

           14.10

            16.39

                  105.84

Mar-24

6

           14.55

            14.20

                    98.69

Jan-26

8

           14.75

            12.50

                    90.09

Mar-27

9

           15.00

            16.29

                  106.05

Jul-34

16

           14.80

            12.15

                    83.92

Mar-36

18

           14.90

            12.40

                    84.57

Apr-37

19

           14.80

            16.25

                  109.08

 


Proshare Nigeria Pvt. Ltd.


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