Liquidity Levels May Drive Rates Southwards Amid PMA – Afrinvest Securities

The Treasury Bills (“T-Bills”) market took a slightly bearish turn last week as average rate stood at 11.4% merely inching 6bps higher W-o-W. Short term bills advanced 20bps W-o-W to 11.0% on the back of sell trades on October bills while medium term instruments closed flat due to investors’ shift to OMO, offering higher yield. On the flip side, buying interest on 21-Mar-19 (up 1.1% W-o-W) drove rates 10 bps lower at the long end of the curve.

Trading last week in the secondary market started off on a cautious note due to the MPC meeting outcome expectations as well as the unexpected OMO Auction conducted by the CBN last Tuesday mopping up 235.9bn inflows Bond coupon payments.
 
However, the market turned slightly bearish on Wednesday as investors needed to free up liquidity ahead of OMO Auction on Thursday where the Apex bank sold an additional 348.6bn leaving liquidity level at negative 75.9bn as at close of market on Friday.

Please find below indicative rates for today: 

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
20-Sep-18 52 8.50 8.60%
8-Nov-18 101 9.70 9.91%
13-Dec-18 136 10.80 11.25%
10-Jan-19 164 11.00 11.57%
21-Feb-19 206 11.20 11.96%
OMO Auction 211 11.30 12.05%

Rates are valid till 1:45pm today (30-Jul-18)
*Please note that the minimum subscription for T-Bills is N100,000.00

This week, inflow from FAAC and N540.0bn worth of matured bills (N215.6 PMA and N324.3 OMO) are expected to hit the system. This is expected to be mopped up by the PMA scheduled to hold on Wednesday (details below) and possible OMO auctions.

Tenor 91-day 182-day 364-day
Last Stop Rate (%) p.a. 10.00 10.50 11.49

Consequently, we anticipate rates to trend southwards this week due to high demand stoked by higher liquidity. Investors are therefore advised to watch keenly for opportunities in primary market issues.

FGN Bonds Market Update: Bearish Sentiments Drive Average Yield 4bps Higher
Average yield on benchmark bonds advanced 4bps marginally W-o-W to reverse the mild bullish run last week. Market players however showed buying interest in medium-term bonds which dipped 10bps towards the end of the week. On the flip side, the short-term instruments advanced 34bps due to weaker demand while long term bonds stood at an average yield of 14.1% W-o-W.

Please see results of the Bond Auction which held last week below:

Bond 12.75% FGN APR 2023 13.53% FGN MAR 2025 13.98% FGN FEB 2028
Tenor 5-Year 7-Year 10-Year
Amount Offered (N‘bn) 25.0 25.0 40.0
Total Bids 14 15 83
Successful Bids 12 14 75
Subscription (N‘bn) 12.9 13.6 50.5
Amount Allotted (N‘bn) 8.9 11.6 46.4
Range of Bids (%) 13.3500 – 13.9000 12.8000 – 14.4900 12.5000 – 14.6490
Marginal Rates (%) 13.69 14.00 14.30
Subscription Ratio 0.5x 0.5x 1.3x
Allotment Ratio 0.7x 0.9x 0.9x

This week, we believe yields would remain around current levels due to the weak sentiment in the market.

Please see below indicative bond rates for today:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Feb-20 2            12.95             15.54                   103.50
Jul-21 3            13.40             14.50                   102.60
Jan-22 4            13.25             16.39                   108.55
Mar-24 6            13.52             14.20                   102.58
Jan-26 8            14.03             12.50                     93.04
Mar-27 9            13.92             16.29                   111.64
Feb-28 9            14.27             14.00                     98.61
Jul-34 16            14.05             12.15                     88.01
Mar-36 18            14.05             12.40                     89.29
Apr-37 19            14.08             16.25                   114.14

Rates are valid till 1:45pm today (30-Jul-18)
*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 brokerageteam@afrinvest.com or contact the persons below:

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