T- Bills Market Reverses Bullish Run as PMA Holds Tomorrow: T-Bills and FGN Bonds Indicative Rates

The Nigerian Treasury Bills (“T-Bills”) market reversed prior week’s bullish performance as average rate across tenors closed higher by 0.2% W-o-W to settle at 12.5% on Friday. Investors sold off short term instruments particularly 11-Oct-18 (+1.9%) and 18-Oct-18 (+1.6%). The long-term bills also witnessed sell pressures as investors sold off some positions in 1-Aug-19 and 18-Jul-19 bills with rates on both instruments inching higher by 4bps and 3bps respectively. On the flip side, medium term instruments recorded a bullish performance as average rate slid 11bps with buying interest recorded in 3-Jan-19 (-0.5%) and 17-Jan-19 (-0.4%).

Noteworthy to mention is the decision of the Monetary Policy Committee (“MPC”) to hold its key policy rate at 14.0% during its last meeting. That said, following sell-offs in the first 3 trading days, buying interests resurfaced on Thursday as average rate edged lower 0.1%. Meanwhile, the CBN did not conduct any Open Market Operation (“OMO”) auction last week despite buoyant system liquidity at N581.6bn long bolstered by OMO maturity repayment of N260.8bn on Thursday. This may be attributed to CBN’s decision to play less aggressively as portfolio investors wound up their books for the 3rd quarter.

This week, the CBN will be conducting a Primary Market Auction (“PMA”) to rollover maturing bills worth N133.5bn. The table below summarises details of the auction as well as expected stop rate range:

Tenor 91-Day 182-day 364-Day
Amount on Offer N9.5bn N17.6bn N106.4bn
Last Stop Rate 11.0000% 12.2000% 13.4750%
Expected Stop Rate 11.00%-11.20% 12.30%-12.50% 13.30%-13.50%

Going into the week, T-Bills and OMO maturities of N133.5bn and N268.2bn are expected to hit the system coupled with FAAC inflows that came in close of Friday, thus we expect liquidity level to remain high. While a PMA will be conducted by the Apex bank to rollover the maturing bills, we expect more OMO auctions this week as CBN looks to mop up excessive liquidity. Nevertheless, we expect rates to trend southwards on sustained buying interest in the secondary market due to high level of system liquidity.

Please see below rates for today:

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
25-Oct-18 23 9.30 9.37
20-Dec-18 79 10.00 10.16
03-Jan-19 93 10.70 11.02
21-Feb-19 142 11.56 12.13
01-Oct-19 364 12.80 14.67
OMO Auction c.200 11.50 12.27
OMO Auction c.300 12.20 13.68

*Please note rates are valid till 1:45pm today (02-Oct-18)
*Minimum amount for T-Bills is N100,000

Bonds Market Update: Local Bonds Market Extends Bullish Run on Increased Buying Enthusiasm
The Local bonds market extended its bullish run into the second consecutive week as average yield slid lower by 0.1% W-o-W to 14.5%. The market witnessed increased appetite for Nigerian bonds particularly among domestic investors on the back of what proved to be the strongest Bond auction in 8 months with the DMO selling N96.7bn as against N39.7bn in August (+143.6%) and N66.9bn in July (+44.5%). Below are full details of the Bond auction held last week:

12.75% FGN APR  2023 13.53% FGN MAR
13.98% FGN FEB 2028
Tenor 5-Year 7-Year 10-Year
Amount Offered N25.0bn N25.0bn N40.0bn
Total Subscription N20.7bn N12.5bn N125.4bn
Amount Allotted N17.5bn N7.4bn N71.9bn
Range of Bids 14.7400%-16.1000% 14.0000%-16.0000% 12.9800%-16.5000%
Marginal Rates 15.0000% 15.1500% 15.2459%
Bid to Cover Ratio 0.8x 0.5x 3.1x
Allotment Ratio 0.7x 0.3x 1.8x

This week, we anticipate the bullish run to continue as domestic investors take position in instruments with attractive yields.

See below bond rates for today:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Feb-20 2            13.20             15.54                   102.79
Jul-21 3            14.50             14.50                     99.94
Jan-22 4            14.10             16.39                   105.84
Mar-24 6            14.55             14.20                     98.69
Jan-26 8            14.75             12.50                     90.09
Mar-27 9            15.00             16.29                   106.05
Jul-34 16            14.80             12.15                     83.92
Mar-36 18            14.90             12.40                     84.57
Apr-37 19            14.80             16.25                   109.08
*Please note rates are valid till 1:45pm on 02-Oct-18

*Minimum amount for FGN Bonds is N20m

To invest in FGN Bonds or T-Bills, send an email to brokerageteam@afrinvest.com

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