Average T-Bills Rate Improves 17bps W-o-W as CBN Tightens Liquidity; FGN Bonds and T-Bills Indicative Rates (22-Oct-18)

The Treasury Bills (“ T-Bills ”) secondary market performance was bearish as average rate across all tenors advanced 17bps W-o-W to 12.8% from 12.6% the previous week. The short and medium-term instruments advanced marginally by 5bps and 8bps respectively W-o-W. In the same vein, more sell-offs on long-term maturities due to more interest in the CBN’s Open Market Operation (“OMO”) and Primary Market Auction(“PMA”) drove rates 15bps higher W-o-W at the longer end of the curve.
On Wednesday, the Apex Bank conducted its bi-weekly PMA where stop rates improved across all tenors – The 91-Day bill inched 6bps to 10.96% from 10.90%, the 182-Day increased 59bps to 12.69% from 12.10% and the 364-Day bill which had the most demand (bid-cover ratio – 1.5x) as expected, advanced 12bps to 13.45% from 13.33%. Please see more details in the table below:

Auction Date 17-Oct-18 17-Oct-18 17-Oct-18
Allotment / Issue Date 18-Oct-18 18-Oct-18 18-Oct-18
Tenor (91-Day) (182-Day) (364-Day)
Offer Amount (N) 5,849,034,000 29,245,168,000 112,535,643,000
Total Subscription (N) 5,924,034,000 30,492,519,000 167,589,949,000
Allotment (N) 5,849,034,000 29,245,168,000 112,535,643,000
Range of Bid Rates (%): 10.7000 – 12.2800 11.5000 – 12.8900 12.5000 – 18.0000
Stop Rates (%): 10.96 12.69 13.449
Bid to Cover Ratio 1.0x 1.0x 1.5x
Allotment Ratio 1.0x 1.0x 0.7x

The CBN also conducted an OMO auction on Thursday where a total N275.3bn was mopped up as against a total of N350.0bn offered across 150, 182 and 329-Day maturities. Prior to the auction, investors anticipated higher stop rates following the PMA and sold off long-term T-Bills in the secondary market to position in the OMO auction. Consequently, the 329-Day OMO bill was 1.1x subscribed while the 105 and 182-Day bills were 0.1x and 0.5x subscribed.
This week, maturing OMO worth N372.9bn is scheduled to hit the financial system on Thursday. We however expect liquidity levels to remain tight (N165.9bn short as at Friday) ahead of the OMO maturity as the CBN continues to mop-up through intermittent OMO auctions. Investors are therefore advised to take advantage of high yields in the secondary market especially on the long-term bills that were sold off last week.

Please see below indicative T-Bills rates for today:

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
22-Nov-18 31 10.70 10.80
03-Jan-19 73 11.20 11.46
10-May-19 200 12.40 13.30
12-Sep-19 325 13.10 14.83
OMO Auction c.200 12.40 13.30
OMO Auction c.300 13.00 14.83

*Please note rates are valid till 1:45pm today (22-Oct-18)
*Minimum amount for T-Bills is N100,000

FGN Bonds Market Update: Bearish Trend Persists Ahead of Wednesday’s FGN Bond Auction
Last week, the domestic bond market remained bearish on the back of continued sell-offs due to more attractive yields in the T-Bills market as well as cautious trading ahead of this week’s bond auction. Thus, average yields on benchmark bonds advanced 19bps W-o-W from 14.80% to 14.99%. We expect more scanty trading sessions at the start of this week as yields become more attractive in the T-Bills market and investors position in the FGN Bond auction where the DMO is set to raise about N115.1bn in 5, 7 and 10-Year instruments (more details below):

Bond Name 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, 6 Months 6 Years, 5 Months 9 Years, 4 Months
Offer Amount (N‘bn)  30- 40  30 – 40  40- 50

Investors are advised to take advantage of the high yield bonds especially those trading at a discount due to continued sell-offs in the past few weeks.

Please see below indicative FGN Bond rates for today:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Feb-20 2            13.50              15.54                    102.31
Jul-21 3            14.60              14.50                      99.72
Jan-22 4            14.15              16.39                    105.63
Mar-24 6            15.00              14.20                      97.07
Jan-26 8            14.90              12.50                      89.52
Mar-27 9            15.07              16.29                    105.66
Jul-34 16            14.80              12.15                      83.93
Mar-36 18            14.90              12.40                      84.56
Apr-37 19            14.80              16.25                    109.09

*Please note rates are valid till 1:45pm today (22-Oct-18)
*Minimum amount for FGN Bonds is N20,000,000

To invest in FGN Bonds or T-Bills, send an email to brokerageteam@afrinvest.com

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