The Bulls Sustain Hold on the Treasury Bills Market as CBN Halts OMO Offers – AFRINVEST
Last week, the Treasury Bills (“T-Bills”) secondary market extended its bullish run into a second consecutive week in the absence of customary Open Market Operations (“OMO”) mop-ups (for the first time in weeks) by the Apex bank. Consequently, yields remained pressured as average yield across tenors dipped further by 75bps W-o-W to settle at 12.3% on Friday from 12.9% the previous week. Also, liquidity from matured OMO bills (N107.0bn) and unfilled bids from the Primary Market Auction (N157.5m) bolstered demand in the secondary market with the 08-AUG-19 (-134bps), 19-SEP-19 (-135bps) and 28-NOV-19 (-135bps) bills witnessing the most buying interest.
At the Primary Market Auction (“PMA”) that held on Wednesday, high demand for the total offer of N33.8bn was witnessed across the 91- (N3.4bn), 182- (N16.9bn) and 364-day (N13.5bn) tenors. The long-term offer witnessed a bid-to-cover ratio of 9.8x, signifying the highest demand as investors sought to lock-in their funds ahead of further rates decline, while the short- and medium-term maturities had a bid-to-cover ratio of 2.4x and 3.0x respectively. Please see details below:
| Auction Date | 15-MAY-19 | 15-MAY-19 | 15-MAY-19 |
| Allotment / Issue Date | 16-MAY-19 | 16-MAY-19 | 16-MAY-19 |
| Tenor | (91-Day) | (182-Day) | (364-Day) |
| Offer Amount ( |
3,384,180,000 | 16,920,900,000 | 13,536,720,000 |
| Total Subscription ( |
8,139,289,000 | 51,141,695,000 | 132,071,726,000 |
| Allotment ( |
4,384,180,000 | 12,920,900,000 | 16,536,720,000 |
| Range of Bid Rates (%): | 9.5000-12.5000 | 11.8000-13.4664 | 12.0000-14.4000 |
| Stop Rates (%): | 10.00 | 12.30 | 12.49 |
| Previous Stop Rates (%): | 10.00 | 12.49 | 12.77 |
| Bid-to-cover Ratio: | 2.4x | 3.0x | 9.8x |
| Allotment Ratio: | 0.5x | 0.3x | 0.1x |
Going into the week, we expect to see a persistent pressure on yields as system liquidity remains buoyant at N288.8bn long (as at Friday) thus, further strengthening demand. In addition, the bullish run may persist this week in the absence of OMO issuances by the CBN.
At the Monetary Policy Meeting (“MPC”) meeting slated for today and tomorrow, we expect the Apex Bank to maintain status quo by keeping all key policy rates at current levels to provide sufficient time for the assessment of the impact of the last rate cut. Investors are advised to cherry-pick T-Bills instruments with attractive yields across the yield spectrum.
Please see indicative T-Bills rates below:
| Maturity | Tenor (Days) | Rate (%) p.a. | Yield (%) p.a. |
| 18-Jul-19 | 59 | 8.00 | 8.10 |
| 8-Aug-19 | 80 | 9.00 | 9.18 |
| 5-Sep-19 | 108 | 10.00 | 10.30 |
| 24-Oct-19 | 157 | 10.80 | 11.33 |
| 28-Nov-19 | 192 | 10.50 | 11.11 |
| 12-Dec-19 | 206 | 10.80 | 11.50 |
| 2-Jan-20 | 227 | 11.10 | 11.92 |
| 30-Jan-20 | 255 | 11.40 | 12.39 |
| 27-Feb-20 | 283 | 11.00 | 12.03 |
| OMO Auction | c.100 | 10.00 | 10.28 |
| OMO Auction | c.200 | 11.90 | 12.73 |
| OMO Auction | c.300 | 12.20 | 13.56 |
Rates are valid till 01:45pm today (20-May-19)
*Please note that the minimum subscription for T-Bills is N100,000.00
FGN Bonds Market Update: Sustained Bullish Trend in the Bonds Market as Yields Decline by 0.4% W-o-W
Similar to the T-Bills market, the Bond market sustained its bullish performance into last week, as average yield shed 43bps W-o-W to 13.4% from 13.8% recorded in the prior week. Particularly, significant demand was witnessed at the shorter end of the curve especially on the 20-SEP-19 (-125bps), 18-OCT-19 (-99bps) and 23-OCT-19 (-95bps) maturities.
This week, we expect to see a slight reversal of this buying interest in the Bond market in anticipation of the upcoming Bond auction scheduled for Wednesday where the DMO is expected to offer a total of N100.0bn across the 5-Year (N40.0bn), 10-Year (N40.0bn) and 30-Year (N20.0bn) tenors. Please see details below:
| BD | 12.75% FGN APR 2023 | NEW FGN APR 2029 | NEW FGN APR 2049 |
| (Re-opening) | (Re-opening) | (Re-opening) | |
| Term-To-Maturity | 3 Years, 11 months | 9 Years, 10 months | 29 Years, 10 months |
| Amount on Offer | |||
| Original Tenor | 5-Year | 10-Year | 30-Year |
Please see indicative FGN bond rates below:
| Bond | Tenor (Years) | Yield (%) | Coupon (%) | Implied Price (N) |
| Jul-21 | 2 | 14.00 | 14.5000 | 100.85 |
| Jan-22 | 3 | 14.00 | 16.3900 | 105.14 |
| Apr-23 | 4 | 13.90 | 12.7500 | 96.58 |
| Mar-24 | 5 | 13.90 | 14.2000 | 100.97 |
| Mar-25 | 6 | 14.10 | 13.5300 | 97.73 |
| Jan-26 | 7 | 14.13 | 12.5000 | 93.05 |
| Mar-27 | 8 | 14.11 | 16.2884 | 110.06 |
| Feb-28 | 9 | 14.15 | 13.9800 | 99.10 |
| Jul-34 | 15 | 14.10 | 12.1493 | 87.87 |
| Mar-36 | 17 | 14.20 | 12.4000 | 88.54 |
| Apr-37 | 18 | 14.13 | 16.2499 | 113.66 |
Rates are valid till 01:45pm today (20-May-19)
To invest in FGN Bonds or T-Bills, send an email to – [email protected]
– AFRINVEST
