Strong Buying Interest Depressed Average T-Bills Yield Further to 12.9% as OMO Stop Rates Dip; T-Bills and FGN Bonds Indicative Rates – Afrinvest

Activities in the Treasury Bills (“T-Bills”) secondary market sustained a bullish trend on the back of bolstered system liquidity from FAAC injections at the start of the week as well as increased demand from offshore investors towards the end of the week. Thus, average yield contracted to settle at 12.9% W-o-W, moving 21bps southward. Demand was largely witnessed in the medium- and long-term bills causing yields to tank 30bps W-o-W apiece. On the flip side, the short-term bills advanced 26bps W-o-W as selloffs were experienced especially on the 6-Jun-19 (+1.75%) and 13-Jun-19 (+1.04%) bills.

The Apex bank resumed its liquidity mop up last week offering a total of N570.0bn in three OMO auctions with a total bid-to-cover ratio of 2.0x, 0.6x and 2.0x on the short-, medium- and long-term offerings. Thus, most demand was witnessed on the long-term bills despite rate moderations.

At the first auction on Monday, N300.0bn was offered across 108-,199- and 353-Day tenors with a total bid-to-cover ratio of 1.4x, while on Tuesday, N130.0bn was auctioned across 93-,205- and 331-Day tenors and with a total bid-to-cover ratio of 1.3x. Finally, at Thursday’s auction a total sum of N140.0bn was offered across 91-,175-and 336-Day tenors respectively which recorded (2.3x) over-subscription on long term bills while the short and medium term were under-subscribed by (2.0x) and (1.0x) respectively. Overall, the stop rates declined consecutively at each auction this week due to the high level of demand.

This week, the Apex bank is scheduled to roll over maturing bills worth N33.8bn through the Primary Market Auction (“PMA”) across the 91 (N3.4bn), 182 (N16.9bn) and 364-Day (N13.5bn) tenors.

Please see below our PMA expectations