Bullish Run Subsides as CBN Resumes OMO Auction – AFRINVEST
Last week, the Treasury Bills (“T-Bills”) secondary market performance was slightly bullish run due to sustained demand for long-term bills, especially the 30-Jan-20 (-71bps) and 13-Feb-20 (-58bps) maturities. However, the resumption of Open Market Operations (“OMO”) by the CBN on Thursday (after two weeks), mopped up liquidity towards the end of the week, albeit with lower stop rates across tenors. Despite the OMO auction, average yield declined marginally by 15bps W-o-W to settle at 12.2% from the 12.3% in the previous week.
After the Monetary Policy Meeting (“MPC”) meeting on Monday and Tuesday, the Committee opted to maintain status quo. Also, despite the CBN Governor’s hint at a possible policy which would limit Deposit Money Banks’ (“DMB”) access to Treasury Bills, the T-Bills secondary market remained stable.
A total of N150.0bn was offered at the OMO auction on Thursday, across the 91- (N20.0bn), 182- (N30.0bn) and 357- (N100.0bn) day tenors with a total bid-to-cover ratio of 2.5x. Particularly, the long term bill enjoyed the most demand with a bid-to-cover ratio of 3.0x while the medium term offer had a bid-to-cover ratio of 2.0x. However, the short-term offer was 0.8x undersubscribed. Interestingly, the Apex bank allotted a total of N360.7bn, 2.4x above its initial offer of N150.0bn in a bid to mop up the significant liquidity levels which stood at N255.6bn long asat Wednesday.
| Maturity | Tenor (Days) | Rate (%) p.a. | Yield (%) p.a. |
| 18-Jul-19 | 52 | 8.00 | 8.09 |
| 29-Aug-19 | 94 | 10.00 | 10.26 |
| 12-Sep-19 | 108 | 10.60 | 10.94 |
| 17-Oct-19 | 143 | 10.70 | 11.17 |
| 14-Nov-19 | 171 | 11.00 | 11.60 |
| 26-Dec-19 | 213 | 11.00 | 11.75 |
| 16-Jan-20 | 234 | 11.10 | 11.95 |
| 20-Feb-20 | 269 | 11.20 | 12.21 |
| OMO Auction | c.100 | 10.00 | 10.28 |
| OMO Auction | c.200 | 11.00 | 11.71 |
| OMO Auction | c.300 | 11.30 | 12.46 |
Rates are valid till 01:45pm today (27-May-19)
*Please note that the minimum subscription for T-Bills is N100,000.00
This week, we expect a further moderation in the bullish run due to expected Primary Market Auction (“PMA”) maturity worth N67.4bn which is scheduled to be rolled over in the upcoming PMA slated for Thursday across the 91- (N24.4bn), 182- (N23.2bn) and 364- (N19.8bn) day tenors. Please see our PMA expectations below:
| Auction Date | 30-May-19 | 30-May-19 | 30-May-19 |
| Allotment / Issue Date | 31-May-19 | 31-May-19 | 31-May-19 |
| Tenor | (91-Day) | (182-Day) | (364-Day) |
| Offer Amount ( |
24,372,790,000 | 23,157,656,000 | 19,842,352,000 |
| Previous Stop Rates (%): | 10.00 | 12.30 | 12.49 |
| Expected Stop Rates Range (%): | 10.20-10.50 | 11.50-12.20 | 12.00-12.30 |
Furthermore, we anticipate that the Apex Bank will continue to keep liquidity levels in check (N250.9bn short as at Friday). Thus, investors are advised to take advantage of the more attractive yields on the medium-dated maturities available in the secondary market.
Please see primary market commercial paper (“CP”) rates for today below:
| Type | Series No. | Maturity Date | Tenor (Days) | Rate (%) | Yield (%) | Offer Close Date |
| Mixta Real Estate Plc | Series 6 | 24-Nov-19 | 180 | 13.6803 | 14.6700 | 27-May-19 |
| Mixta Real Estate Plc | Series 7 | 18-Feb-20 | 266 | 13.8137 | 15.3600 | 27-May-19 |
| Flour Mills of Nigeria Plc | Series 8 | 22-Feb-20 | 270 | 11.9427 | 13.1000 | 28-May-19 |
FGN Bonds Market Update: Bullish Performance in the Bonds Market as Average Yields Dip 4bps W-o-W
Last week, the FGN bonds market sustained its bullish performance,as average yield contracted marginally by 4bps W-o-W to 13.4% especially the 14-Jun-19 (-2.2%) and 29-Jun-19 (-1.4%). However, some selloffs were witnessed on select maturities along the yield curve as investors exited some positions ahead of the Bond auction which held on Wednesday.
Please see detailed result below:
| Bonds | 12.75% FGN APR 2023 | NEW FGN APR 2029 | NEW FGN APR 2049 |
| Term-To-Maturity | 3 Years, 11 months | 9 Years, 10 months | 29 Years, 10 months |
| Amount on Offer | 35,000,000,000 | 35,000,000,000 | 30,000,000,000 |
| Total Subscription ( |
45,977,000,000 | 124,220,000,000 | 100,914,000,000 |
| Amount Allotted: ( |
27,375,000,000 | 35,000,000,000 | 48,930,000,000 |
| Range of Bid Rates (%) | 13.72% -15.30% | 13.97% – 16.00% | 13.80% – 14.98% |
| Stop Rates (%) | 14.11 | 14.24 | 14.49 |
| Previous Stop Rates (%) | 13.50 | 13.50 | 13.50 |
| Bid-to-Cover Ratio | 1.3x | 3.5x | 3.4x |
| Allotment Ratio | 0.6x | 0.3x | 0.5x |
At the bond auction, the clearing rates significantly declined which led to more buying interest in the secondary market. However, we expect to see tapered demand within the bond market as investors may begin to take profit or take advantage of long-term OMO offerings despite the moderating yields. Thus, we advise investors to take advantage of the attractive yields at the short end of the curve, such as the 16-Aug-19 and 20-Sep-19 which appreciated 1.2% and 0.8% respectively as at Friday.
| Bond | Tenor (Years) | Yield (%) | Coupon (%) | Implied Price (N) |
| Jul-21 | 2 | 13.95 | 14.50 | 100.94 |
| Jan-22 | 3 | 13.90 | 16.39 | 105.34 |
| Apr-23 | 4 | 14.05 | 12.75 | 96.15 |
| Mar-24 | 5 | 13.90 | 14.20 | 100.97 |
| Mar-25 | 6 | 14.00 | 13.53 | 98.12 |
| Jan-26 | 7 | 14.25 | 12.50 | 92.58 |
| Mar-27 | 8 | 14.15 | 16.29 | 92.03 |
| Feb-28 | 9 | 14.13 | 13.98 | 99.20 |
| Jul-34 | 15 | 14.28 | 12.15 | 86.88 |
| Mar-36 | 17 | 14.23 | 12.40 | 88.37 |
| Apr-37 | 18 | 14.18 | 16.25 | 113.29 |
Rates are valid till 01:45pm today (27-May-19)
To invest in FGN Bonds or T-Bills, send an email to – [email protected]
