T-Bills Market Reverses Bullish Run as Average Rate Advances to 14.3%

Proshare

Monday, January 07, 2019    01:43PM / Afrinvest Research

 

Last week, the Treasury Bills (“T-Bills”) market operated on four trading sessions, which included the final trading session of 2018 and the first three trading sessions of this year. Following the bearish run recorded on the concluding trading sessions of 2018, the T-Bills market opened up this year (Wednesday – after the New year break on Tuesday) on a bullish note as investors took advantage of  attractive rates on some of the short- and medium-term maturities, particularly on the 04-Apr-19 (-171bps W-o-W) and 02-May-19 (-67bps W-o-W). However, there was a reversal on the last two trading sessions of last week, as average rate across tenors advanced marginally by 6bps W-o-W to settle at 14.3% from the 14.2% recorded in the previous week. 

On Wednesday, the CBN held its first Primary Market Auction (“PMA”) in 2019 where a total of N74.8bn was offered across the 91-, 182- and 364-day tenors. This offer was met with high demand, having a total subscription of N114.4bn which resulted in a bid-to-cover ratio of 1.5x as the short (N20.1bn subscribed vs N10.0bn offered), medium (N24.5bn subscribed vs N20.0bn offered) and long-term (N69.7bn subscribed vs N44.8bn offered) bills were all oversubscribed. The CBN allotted exactly the amount offered across tenors.

 

Please see details below:

Auction Date

02/01/2019

02/01/2019

02/01/2019

Allotment / Issue Date

03/01/2019

03/01/2019

03/01/2019

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer Amount (N)

10,000,000,000

20,000,000,000

44,837,720,000

Total Subscription (N)

20,163,183,000

24,505,944,000

69,722,398,000

Allotment (N)

10,000,000,000

20,000,000,000

44,837,720,000

Range of Bid Rates (%):

10.5000 – 11.9000

12.8000 – 14.2500

14.4000 – 16.0000

Stop Rates (%):

10.8990

13.1000

14.5000

Previous Stop Rates (%):

10.9000

13.1000

14.4500

Bid-to-Cover Ratio:

2.0x

1.2x

1.6x

 

The Central Bank conducted its customary interventions, holding two Open Market Operations (“OMO”) auctions on Monday and Thursday. At the Monday auction, a total of N270.0bn was offered across the 94, 184 and 346-days tenors which had a bid-to-cover ratio of 0.3x – a total subscription of N68.6bn. The second auction which held on Thursday was also met with low demand as the total of N450.0bn offered across the 92, 182 and 364-day tenors had a total subscription of N241.6bn. This resulted in a bid-to-cover ratio of 0.5x. Also, the Apex bank held a special OMO auction on Thursday, having a total sale of N184.1bn for the 364-day tenor.

 

Going into the week, we expect market players to return to the T-Bills market with renewed buying interest as T-Bills and OMO maturities worth N375.4bn are scheduled to hit the financial system although liquidity levels stood at N157.8bn negative as at Friday. Thus, we advise investors to take advantage of the attractive rates in the secondary market particularly on the shorter end of the curve as investors anticipate further hike in interest rate before the general elections next month.

 

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

17-Jan-19

10

12.70

12.74

21-Feb-19

45

12.20

12.39

07-Mar-19

59

12.20

12.39

02-May-19

115

11.90

12.36

19-Sep-19

255

13.60

15.03

24-Oct-19

290

14.04

15.80

19-Dec-19

346

14.11

16.29

OMO Auction

c.200

12.50

13.55

OMO Auction

c.350

14.20

16.45

Rates are valid till 01:45pm today (07-Jan-18)
*Please note that the minimum subscription for T-Bills is N100,000.00

 

FGN Bonds Update; Buying Interests Extends as the Bonds Market Records Bullish Performance 

Last week, the bonds market extended its bullish run following renewed buying interest by investors, particularly on the short end of the curve especially on the 12-Apr-19 (-176bps W-o-W) and 22-Mar-19 (-148bps W-o-W) maturities. Consequent on this, average yield declined by 17bps W-o-W to settle at 15.1% from 15.2% recorded in the previous week. 

This week, we expect to see a shift of the buying interest on the shorter maturities as investors begin to take advantage of the attractive yields on the longer end of the curve particularly, the 14-Mar-19 maturity.

 

Please see below rates for today:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Feb-20

2

           14.45

             15.54

                   101.03

Jul-21

3

           15.20

             14.50

                     98.57

Jan-22

4

           14.70

             16.39

                   104.01

Mar-24

6

           14.80

             14.20

                     97.82

Jan-26

8

           15.35

             12.50

                     87.97

Mar-27

9

           15.30

             16.29

                   104.47

Feb-28  

10

           15.30

             13.98

                     92.03

Jul-34

16

           15.15

             12.15

                     82.24

Mar-36

18

           15.20

             12.40

                     83.01

Apr-37

19

           15.20

             16.25

                   106.36

Rates are valid till 01:45pm today (07-Jan-18)
*Please note that the minimum subscription for Bonds is N20,000,000.00c


 Proshare Nigeria Pvt. Ltd.


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