CBN Raises OMO Stop Rates, Succumbs to Investor Pressure; PMA Holds this Wednesday
Last week, the Treasury Bills (“T-Bills”) market traded slightly bullish in the first few sessions as excess liquidity in the financial system buoyed demand on the shorter end of the curve further supressing rates, particularly the 27-Sep-18 maturity (-3.3% W-o-W). However, by mid-week, the demand pressures in the secondary market reversed as investors anticipated higher stop rates at the OMO auctions. Consequently, average rate across tenors trended upwards by +17bps to 11.9% from 11.7% recorded the previous week.
The medium and long-term bills remained relatively quiet as cautious investors anticipated a rise in OMO stop rates. While short and medium-term instruments advanced (+21bps and +5bps W-o-W respectively) as a result of sell-offs by investors, rates across long term bills declined -46bps W-o-W particularly on the 18-Jul-19 maturity (-56bps W-o-W at 12.4%).
On the back of robust system liquidity (N794.9bn long as at Tuesday), the Central Bank of Nigeria (“CBN”) conducted three OMO auctions in a bid to ease level of liquidity. At the first auction on Tuesday, the CBN offered a total of N600.0bn (44.5% subscribed) across the 72 and 198-days tenors which were N83.2bn subscribed vs. N100.0bn offered and N184.2bn subscribed vs. N500.0bn offered respectively.
On Wednesday, the Apex bank increased its offering to three maturities (64, 127 and 190-day tenors) at the second auction of the week in a bid to mop-up system liquidity. The CBN was able to mop up N156.9bn (c.39.0%) against the total of N400.0bn offered (64 days – N9.8bn subscribed vs N100.0bn offered, 127 days – N10.1bn subscribed vs N100.0bn offered, and 190 days – N137.1bn subscribed vs N200.0bn offered).
On Thursday, the CBN held the final auction of the week, offering a total of N550.0bn across the 63, 126, and 182-day tenors. The Apex bank’s intervention was 34.5% subscribed despite increase in stop rates for the longer tenor.
Please see indicative T-Bills rates for today below:
| Maturity | Tenor (Days) | Rate (%) p.a. | Yield (%) p.a. |
| 18-Oct-18 | 38 | 9.80 | 9.90 |
| 01-Nov-18 | 52 | 9.70 | 9.84 |
| 13-Dec-18 | 94 | 10.80 | 11.11 |
| 17-Jan-19 | 129 | 11.26 | 11.73 |
| 18-Jul-19 | 311 | 10.86 | 11.97 |
| OMO Auction | 190-300 | 11.50 | 12.20 |
Rates are valid till 1:45pm today (10-Sep-18)
*Please note that the minimum subscription for T-Bills is N100,000.00
This week, we expect T-Bills and OMO maturities worth N136.3bn and N240.6bn respectively to hit the system, further boosting liquidity levels (N349.0bn long as at Friday). However, we maintain that investors will remain cautious ahead of the Primary Market Auction (PMA) slated for Wednesday with a total offering of N136.3bn across the 91, 182 and 364-day maturities. In addition, due to the high liquidity levels as well as expected inflows, we anticipate a more aggressive move by the CBN via OMO mop-ups. As a result, we advise investors to take advantage of OMO offers on the back of the higher stop rates at the last auction. Furthermore, we expect the secondary market T-Bills rate to adjust upwards in line with OMO and PMA stop rates.
Please see below details for the PMA slated for Wednesday:
| Tenor | Amount on Offer | Previous Stop Rate |
| 91 days | 11.0000% | |
| 182 days | 12.3000% | |
| 364 days | 13.0456% |
Please see secondary market Commercial Paper (“CP”) rates for today below:
| Type | Maturity | Tenor | Rate (%) | Yield (%) |
| Dangote Cement | 14-May-19 | 253 | 11.50 | 12.50 |
| Dangote Cement | 13-Feb-19 | 163 | 11.40 | 12.01 |
| Access | 15-Nov-18 | 73 | 11.00 | 11.25 |
Rates are valid till 1:45pm today (10-Sep-18)
*Please note that the minimum subscription for CP is N50,000,000.00
FGN Bonds Market Update: Average Yield Advanced 26bps W-o-W to 14.7%
The bearish sentiment persisted in the beginning of the week due to sell-offs particularly in the 15-Jul-2021 and 27-Jan-2022 maturities. However, as the week progressed there was some bargain hunting as investors focused on the mid-tenured bonds especially the 17-Mar-2027 maturity. Overall, the bonds market traded on mixed sentiments as yields advanced +26bps W-o-W at 14.7% from 14.5%.
Please see indicative bond rates for today below:
| Bond | Tenor (Years) | Yield (%) | Coupon (%) | Implied Price ( |
| Feb-20 | 2 | 13.90 | 15.54 | 102.02 |
| Jul-21 | 3 | 14.90 | 14.50 | 99.04 |
| Jan-22 | 4 | 14.75 | 16.39 | 104.19 |
| Mar-24 | 6 | 14.95 | 14.20 | 97.25 |
| Jan-26 | 8 | 15.15 | 12.50 | 88.43 |
| Mar-27 | 9 | 15.10 | 16.29 | 105.59 |
| Feb-28 | 9 | 14.27 | 14.00 | 98.61 |
| Jul-34 | 16 | 14.80 | 12.15 | 83.91 |
| Mar-36 | 18 | 14.90 | 12.40 | 84.57 |
| Apr-37 | 19 | 14.80 | 16.25 | 109.06 |
Rates are valid till1:45pm today (10-Sep-18)
*Please note that the minimum subscription for Bonds is N20,000,000.00
Going into the week, we expect the bearish sentiments to persist as investors remain risk-averse to Emerging Markets despite attractive yields. We advise investors to take positions along the medium to longer end of the curve due to higher yields.
To invest in FGN Bonds or T-Bills, send an email to [email protected] or contact – +234 812 175 9032
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