Business and Economy

Bearish Sentiments in T-Bills Halt as Improved Demand from Local Investors Pushes Average Yield down to 13.8% – AFRINVEST

The bearish sentiments in Treasury Bills (“T-Bills”) secondary market ceased last week, following robust system liquidity (c. N704.7bn positive as at Friday) that incited local demand across the yield curve. As a result, activities were largely bullish during the five trading sessions of the week as investors rallied for higher yields despite the CBN intervention at the Primary Market auction(“PMA”)  on Wednesday as well as its Open Market Operations (“OMO”)  auction on Thursday and Friday.

Major buying interests were witnessed at the short and medium end of the curve, particularly the 5-Dec-19 (-231bps), 9-Jan-20 (-228bps) and 24-Oct-19 (-205bps) maturities. Consequently, average yield across all tenors contracted by 140 bps W-o-W to settle at 13.8% from 15.2% the previous week.

At the PMA which held on Wednesday, the CBN offered worth of T-Bills as against the N347.8bn total subscription, translating to a bid to cover ratio of 1.7x vs 4.3x at the previous auction. All tenors were oversubscribed with the 364-day instrument enjoying the most interest. Consequently, the marginal rates across all tenors inched higher by 1.4%, 0.2% and 0.9% respectively as the CBN fully allotted to the total amount offered.

Please see a detailed summary in the table below:

Auction Date 28-Aug-19 28-Aug-19 28-Aug-19
Allotment / Issue Date 29-Aug-19 29-Aug-19 29-Aug-19
Tenor 91-Day 182-Day 364-Day
Offer Amount (N) 24,372,790,000 38,751,846,000 145,475,021,000
Total Subscription (N) 29,077,546,000 46,150,870,000 272,541,557,000
Allotment (N) 24,372,790,000 38,751,846,000 145,475,021,000
Range of Bid Rates (%) 9.2000-12.4990 11.000-15.000 11.8922-14.3199
Stop Rates (%) 11.1000 11.5878 12.8900
Previous Stop Rates (%) 9.7000 11.3500 12.0000
Bid-to-Cover Ratio 1.2x 1.2x 1.9x
Allotment Ratio 1.0x 1.0x 1.0x

On Thursday, the CBN conducted an OMO auction, offering a total of N400.0bn across the 91, 189 and 364day instruments. However, subscription levels remained scanty despite an increase in the stop rates, as investors preferred more attractive rates in the secondary market. Thus, the three tenors offered recorded a bid-to-cover ratio of 0.13x, 0.07x and 1.45x, respectively.

Similarly, the CBN’s OMO intervention on Friday saw a total offering of N400bn, albeit across the 90, 188 and 363day instruments. This was met with a total subscription of N237.13bn, showing a 0.05x, 0.03x and 1.14x bid to cover ratio across the short, medium and long-term bills respectively. Notwithstanding, stop rates trended closely to that of the previous day auction, save for the 364 day bill which improved slightly.

Going into this week, we expect the momentum in demand to be sustained as inflows from maturing OMO bills (N204.1bn) is expected to hit the financial system which will further bolster liquidity. Nevertheless, we expect the CBN to maintain its pace of excess liquidity mop-ups to keep system liquidity in check.

Investors are therefore advised to take position in T-Bills and OMO offers with attractive yields.

Please see indicative secondary market T-Bills rates below:

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
5-Dec-19 94 11.50 11.85
16-Jan-20 136 11.90 12.45
27-Feb-20 178 12.00 12.75
16-Apr-20 227 11.55 12.44
13-Aug-20 346 12.50 14.18
OMO Auction c.100 10.50 10.81
OMO Auction c.200 11.00 11.71
OMO Auction c.350 12.90 14.72

Rates are valid till 01:45pm today (2-Sept-19)

*Please note that the minimum subscription for T-Bills is N100,000.00

How do I fund my account?
You can make transfers for Treasury Bills (T-Bills)SharesFGN Savings Bond and FGN Bonds directly from your bank account using your online banking platform through NIBBS E-Bills Pay (Read FAQs). The banks currently enabled are Guaranty Trust Bank, First Bank, Stanbic IBTC, Wema Bank and Zenith Bank.
Kindly follow the steps below to start investing with E-Bills Pay:

  • Log into your bank’s online platform
  • Click on NIBSS E-Bills payment and select Afrinvest Securities from the drop-down list of billers/merchants.
  • Select the product you want to invest in (Treasury Bills, FGN Bonds etc)
  • Enter your Afrinvest Securities Account Number, the amount you want to invest and pay.

Your Afrinvest Securities account will be automatically credited for your preferred investment
NOTE: Payment should ONLY be made to Afrinvest Securities Limited Client bank accounts

FGN Bonds Market Update: Renewed Local Demand Pressures Average Yield down by 40bps W-o-W

In the bonds space, performance mirrored the bullish T-Bills markets as domestic investors took position across the yield curve  coupled with a reduced momentum in sell-offs by foreign investors. Consequently, average yield declined 40bps to settle at 14.0% from 14.4% the previous week.

Major buying interests were witnessed at the short and medium tenors particularly the 14-Feb-20 (-170bps), 14-Mar-20 (-155bps) and 27-Jan-22 (-60bps) maturities.

Going into this week, The Debt Management Office (“DMO”) is scheduled to auction the 2 and 3-year tenor FGN savings bond for the month of September at 11.150% and 12.150% respectively.

Furthermore, we expect the spill-over effect from the T-Bills market to drive momentum in the Bonds market on the back of improved system liquidity. Investors are therefore advised to take advantage of bonds with attractive yields and trading at a discount.

Please see indicative FGN bond rates below:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price
Jul-21 2 13.65 14.50 101.31
Jan-22 3 14.00 16.39 104.69
Apr-23 4 13.95 12.75 96.61
Mar-24 5 13.85 14.20 101.14
Mar-25 6 13.80 13.53 98.95
Jan-26 7 14.05 12.50 93.57
Mar-27 8 14.10 16.29 109.94
Feb-28 9 14.10 13.98 99.41
Jul-34 15 14.35 12.15 86.58
Mar-36 17 14.35 12.40 87.77
Apr-37 18 14.35 16.25 112.04
Apr-49 30 14.45 14.80 102.33

Rates are valid till 01:45pm today (2-Sept-19)

*Please note that the minimum subscription for Bonds is N20,000,000.00

To invest in FGN Bonds or T-Bills, send an email to – [email protected]


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