The Bears Take Center Stage As Average T-Bills Yield Advances 8bps WoW To 13.4%


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:

Auction Date 11-Sep-19 11-Sep-19 11-Sep-19
Allotment / Issue Date 12-Sep-19 12-Sep-19 12-Sep-19
Tenor 91-Day 182-Day 364-Day
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
Allotment (N) 15,000,000,000 14,002,523,000 129,651,700,000
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
Bid-to-Cover Ratio 2.2x 1.7x 2.1x
Allotment Ratio 0.5x 0.6x 0.5x

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.
26-Dec-19 101 11.00 11.35
16-Jan-20 122 11.40 11.85
13-Feb-20 150 11.60 12.18
16-Apr-20 213 12.00 12.90
27-Aug-20 346 12.61 14.32
OMO Auction c.100 10.64 10.96
OMO Auction c.200 11.20 11.93
OMO Auction c.350 12.90 14.72

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)
Jul-21 2 13.80 14.50 101.04
Jan-22 3 14.05 16.39 104.61
Apr-23 4 14.15 12.75 95.97
Mar-24 5 13.95 14.20 100.75
Mar-25 6 13.85 13.53 98.79
Jan-26 7 14.12 12.50 93.00
Mar-27 8 14.10 16.29 109.69
Feb-28 9 14.12 13.98 99.30
Jul-34 15 14.38 12.15 86.09
Mar-36 17 14.40 12.40 87.29
Apr-37 18 14.40 16.25 111.48
Apr-49 30 14.50 14.80 102.13

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