Average T-Bills Rate Rose 184bps W-o-W to 13.8% Amidst Buoyant System Liquidity – Afrinvest

Last week, the Treasury Bills (“ T-Bills ”) market continued its bearish run, despite robust system liquidity as investors remained cautious in anticipation of higher stop rates at the Primary Market Auction (“PMA”) slated for Wednesday and possible Open Market Operations (“OMO”) interventions by the CBN. Consequently, average rate across tenors advanced 184bps to close at 13.8% from 11.9% the previous week on the back of investor sell-offs on short-term instruments, particularly the 27-Sep-18 maturity which spiked 7.6% W-o-W to 14.0% from 6.5% the previous week. Rates across the medium-term instruments (+1.3%) and long-term instruments (+1.1%) also advanced W-o-W on account of sell-offs in 3-Jan-19 (+1.9%) and 21-Mar-19 (+1.3%) bills.

In line with our expectations, the CBN made a more aggressive move to mop-up the buoyant system liquidity (N525.1bn long as at Monday), holding three OMO auctions last week. At the first auction on Monday, the Apex bank offered a total of N200.0bn for the 199-day maturity which was 68.7% undersubscribed (N62.6bn subscribed vs. N200.0bn offered) and a meagre 10.9% total sale. However, there was no subscription for the 73 and 136-day tenors due to similar tenors with more attractive rates in the secondary T-Bills market.

Following the weak demand at the last OMO auction, the CBN hiked the stop rate on the 324-day bill on Tuesday. Consequently, the total N250.0bn offered was 44.2% subscribed (121 days – N4.0bn subscribed vs. N50.0bn offered, 198 days – N9.4bn subscribed vs. N50.0bn offered and 324 days – N97.2bn subscribed vs. N150.0bn offered). However, the 121-day bill alone remained unallotted with the 198-day and 324-day recording 0.6% and 54.4% allotment respectively. Furthermore, at the final intervention of the week on Thursday, the total N350.0bn offered was N109.0bn subscribed but with no sale across the 119, 189 and 364-day tenors due to higher stop rates quoted by investors.

At the PMA on Wednesday, the CBN maintained the stop rates on its short and mid-term instruments at 11.0% and 12.3% respectively while the 364-day instrument inched to 13.5% from 13.2%. In addition, the auction witnessed strong demand of N213.2bn above the N136.3bn offered especially on the mid and long-term bills which were oversubscribed at 1.9x and 1.6x respectively.

Please see detailed results below:

Auction Date 12-Sep-2018 12-Sep-2018 12-Sep-2018
Allotment / Issue Date 13-Sep-2018 13-Sep-2018 13-Sep-2018
Tenor (91-Day) (182-Day) (364-Day)
Offer Amount (N) 6,217,066,000 4,002,523,000 126,085,442,000
Total Subscription (N) 3,382,186,000 7,648,976,000 202,336,377,000
Allotment (N ) 2,650,808,000 4,002,523,000 129,651,700,000
Range of Bid Rates (%): 11.0000-14.0000 12.0000-13.1970 11.0000-20.0000
Stop Rates (%): 11.0000 12.3000 13.5000
Allotment Ratio 0.4x 1.0x 1.0x
Subscription Ratio 0.5x 1.9x 1.6x

Going into the week, we expect some buying interest to return to the secondary market as investors take advantage of the attractive rates, particularly on the short-term instruments. Also, we anticipate that the Apex bank will remain aggressive in mopping up the buoyant system liquidity through its regular interventions, as N400.7bn worth of T-Bills and OMO maturities are expected to hit the system this week, further boosting liquidity (N287.4bn long as at Friday). Furthermore, with the Apex bank offering a total of N178.4bn across the 91, 182 and 364-days tenors at the PMA slated for Wednesday, we advise investors to take advantage of the generally improved rates especially the short-term bills.

Please see indicative T-Bills rates for today below:

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
01-Nov-18 45 10.60 10.74
27-Dec-18 101 11.70 12.09
24-Jan-19 129 12.46 13.03
18-Jul-19 304 12.00 13.33
OMO Auction c.200 11.50 12.27
OMO Auction c.300 12.20 13.68

Rates are valid till 1:45pm today (17-Sep-18)
*Please note that the minimum subscription for T-Bills is N100,000.00

FGN Bonds Market Update: Average Yield Advanced 42bps W-o-W to Cross the 15.0% Psychological Line

The bonds market performance was largely bearish as investor sell-offs persisted at the shorter end of the curve, particularly the 12-Jul-2019 (+1.01%), 16-Aug-2019 (+1.04%) and 20-Sep-2019 (+1.03%) maturities. In addition, weak buying interest was recorded at the longer end of the curve, especially in the 23-Feb-2023 (-0.16%) instrument. As a result, average yields across tenors inched +42bps W-o-W to close at 15.1% from 14.7%.

Please see indicative bond rates for today below:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Feb-20 2 13.85 15.54 102.05
Jul-21 3 15.15 14.50 98.49
Jan-22 4 14.80 16.39 104.03
Mar-24 6 15.00 14.20 97.07
Jan-26 8 15.10 12.50 88.64
Mar-27 9 15.08 16.29 105.69
Jul-34 16 14.80 12.15 83.91
Mar-36 18 14.90 12.40 84.58
Apr-37 19 14.80 16.25 109.07

Rates are valid till 1:45pm today (17-Sep-18)
*Please note that the minimum subscription for Bonds is N20,000,000.00

This week, we expect some improvements in buying interest especially at the shorter-end of the curve due to the attractive rates. Notwithstanding, investors are expected to remain cautious on continued weak sentiments on Emerging Markets.

To invest in FGN Bonds or T-Bills, send an email to brokerageteam@afrinvest.com or contact  +234 812 175 9032

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