Demand Weakens as Average Treasury Bill Rates Remain Quiet at 11.7%

The Nigerian Treasury Bills (“T-Bills”) market started the week on a relatively bearish note with improved demand on Thursday due to robust system liquidity and attractive yields in the short and medium instruments. As a result, average treasury bill rates remained quiet  at 11.7%. Additionally, average rate declined marginally by 5bps and 18bps on the short-medium end of the curve. On the flipside, investors showed little appetite for long-term bills which advanced 6bps W-o-W.

Furthermore, demand for the Apex bank’s OMO auction was underwhelming as merely 25.0% of the total N400.0bn offered was subscribed despite buoyant system liquidity. The offers received a subscription of N11.3bn vs. N100.0bn for the 90-day instrument and N88.6bn vs. N300.0bn offered for the 203-day instrument. Thus, system liquidity closed the week at N264.1bn long as the CBN’s OMO auction failed to mop-up the N364.0bn OMO maturity on Thursday.

Please see indicative rates for today below:

Maturity	Tenor (Days)	Rate (%) p.a.	Yield (%) p.a.
20-Sep-18	24	7.30	7.50
01-Nov-18	66	9.70	10.19
13-Dec-18	108	10.60	11.27
03-Jan-19	129	11.10	11.56
18-Jul-19	325	10.70	11.84

A Primary Market Auction (‘’PMA”) is expected to hold this week with the CBN offering a total of N206.9bn across the 91, 182 and 362-day maturities. Going into this week, N521.7bn worth of maturing funds (N206.9bn PMA T-Bills and N314.8bn OMO) is scheduled to hit the financial system further buoying liquidity levels.

Please see our expectations for the PMA below:

Tenor	Amount on Offer (bn)	Previous Stop Rate (%)
91 days	25.0	10.00
182 days	45.0	10.40
364 days	137.0	11.22

We however expect the CBN will attempt to mop-up liquidity this week as usual. On the back of this, we anticipate strengthened demand especially on short-term and medium-term T-Bills with attractive yields.

In the near term, we expect to see more issuances of commercial papers by blue chips companies due to the successful outings witnessed by recent issuers at decent rates relative to prevailing lending rates.

FGN Bonds Market Update: Average Yield Advances 10bps Marginally

In the Bonds market, activity stayed bearish as average yield on benchmark bonds advance 5bps W-o-W to close at 14.55% from 14.5% the previous week. This was due to sustained sell orders by offshore players.

Please see indicative bond rates for today below:

Bond	Tenor (Years)	Yield (%)	Coupon (%)	Implied Price (N)
Feb-20	2	13.40	15.54	102.74
Jul-21	3	13.80	14.50	101.58
Jan-22	4	13.80	16.39	106.83
Mar-24	6	14.35	14.20	99.42
Jan-26	8	14.81	12.50	89.78
Mar-27	9	14.85	16.29	106.82
Jul-34	16	14.80	12.15	83.91
Mar-36	18	14.90	12.40	84.54
Apr-37	19	14.80	16.25	109.05

This week, we expect a continued bearish run as sell-offs persists. Thus, presenting an opportunity for investors totake position in bonds with attractive yields especially 2023s (+30bps) and 2024s (+25bps).

To invest in FGN Bonds or T-Bills, send an email to [email protected] or contact +234 809 778 3100