September 16, 2019/Afrinvest Research
Last week, the Treasury Bills (“T-Bills“) secondary market closed on bearish note as investors sold off to take position in the Primary Market and OMO auctions. Consequently, average yield across all tenors advanced 8 bps W-o-W to settle at 13.4%. Sell pressures were witnessed on the short and mid- segments of the curve as average yield rose 5bps and 39bps respectively.
In last week’s Primary Market Auction (“PMA“), the CBN successfully offered N158.7bn worth of bills across 91-, 182-and 364-Day at respective stop rates of 11.1%, 11.80% and 13.29%. As anticipated, the 91-, 182- and 364-Day instruments were oversubscribed by 2.2x, 1.7x and 2.1x respectively.
Please see a detailed summary in the table below:
|Allotment / Issue Date||12-Sep-19||12-Sep-19||12-Sep-19|
|Offer Amount (N)||15,000,000,000||14,002,523,000||129,651,700,000|
|Total Subscription (N)||32,324,750,000||24,214,529,000||269,358,167,000|
|Range of Bid Rates (%)||9.6000 – 14.0000||11.2000 – 12.9800||12.5000 – 14.4480|
|Previous Stop Rates (%)||11.1000||11.5878||12.8900|
|Stop Rates (%)||11.1000||11.7990||13.2860|
In a bid to curtail possible excess liquidity in the system as a result of expected high volume maturities, the Apex Bank issued OMO bills last week. At the OMO auction, a total of N300.0bn across the 91-,182- and 364-Day tenors was offered and due to low allotment at Wednesday’s PMA, we witnessed excess demand on the short- and long-term bills (2.8x and 1.9x respectively) while the 182-Day bill was 0.3x undersubscribed. The CBN however prorated OMO winnings on the 364-Day bill by 69.6% due to the high level of bids.
This week, the CBN is scheduled to roll over maturing bills worth N179.8bn through another PMA across the 91-(N3.0bn), 182-(N8.4bn) and 364-Day (N168.4bn) tenors.
|TENOR||91- DAY||182 – DAY||364 – DAY|
|Offer Amount (N)||3,000,000,000||8,385,196,000||168,361,351,000|
|Last Stop Rate (%)||11.1||11.80||13.29|
|Expected Stop Rate Range (%)||11.0%-11.40%||11.70%-12.0%||13.2%-13.5%|
Please see indicative secondary market T-Bills rates below:
|Maturity||Tenor (Days)||Rate (%) p.a.||Yield (%) p.a.|
Going into the week, we expect to see a boost in system liquidity (N34.9bn positive as at Friday) on the back of a combined T-Bills maturities of N536.3bn from OMO (N356.5bn) and PMA (N179.8bn). As a result, we expect the CBN to intervene by mopping up excess liquidity via OMO auctions.
Investors are therefore advised to take advantage of T-Bills with attractive yields across the curve as well as primary offerings this week.
FGN Bonds Market Update: Bearish Momentum Sustained as Average Yield Advances by 5 bps W-o-W
In the same vein, the bond market sustained its bearish run as average yield trended northwards by 5 bps as a result of continued sell-off in the market. As a result, average yield settled at 14.2% W-o-W. The medium-term instruments particularly the 23-MAR-25 (+49bps) witnessed the most sell pressure. On the flip side, the 13-FEB-24(-25bps) enjoyed a slight buying interest.
This week, we anticipate a continued bearish trend in the bond market as market activities might remain tepid. Thus, investors are advised to cherry pick attractive instruments trading at a discount.
Please see indicative bond rates below:
|Bond||Tenor (Years)||Yield (%)||Coupon (%)||Implied Price (N)|