Culled–Proshare

December 10, 2018/Afrinvest Research 

The Treasury Bills (“T-Bills”) market started the month on a bearish note with average rate across tenors increasing 73bps W-o-W from 13.7% to 14.4%. The bearish performance can be largely attributed to the increase in the frequency of Open Market Operations (“OMO”) auction which was conducted on all trading sessions of the week save for Friday. This squeezed liquidity level in the system leading to significant sell-offs on Friday.

In the secondary market, sell-offs were witnessed on short-term instruments up 135bps, especially the (20-Dec-18) and (7-Mar-19) bills which inched 167 and 152bps respectively as investors positioned in higher yielding instruments in the OMO auctions. In the same vein, rates on the medium- and long-term instruments appreciated 78bps and 18bps respectively.

In a bid to control system liquidity and curb potential pressure on the Naira, the Apex bank continued its aggressive mop ups on all trading days save for Friday. The short term OMO offerings were grossly undersubscribed (bid to cover ratio of 0.0x) with N200.0bn offered against N0.2bn sold due to more attractive alternatives in the secondary market. The medium-term instrument was 0.2x subscribed with N84.7bn sold out of N380.0bn offered. 

The long-term bill received the most interest with 1.2x subscription as a total of N560.1bn was sold out of N700.0bn offered and an additional N287.7bn sold to banks in a special OMO arrangement on Thursday. Consequent on this, investors sold positions in the secondary market to free up cash driving rates further northwards. Cumulatively, the CBN mopped up a total of N932.8bn last week, leaving liquidity levels at N234.0bn short as at Friday.

This week, we expect the CBN to continue the regular OMO auctions as a total of N551.4bn (OMO – N498.7bn and Primary Market Auction (PMA) – N52.7bn) scheduled to hit the system on Thursday. Notably, an additional total of N1.2tn in OMO and PMA is expected to mature this year, thus we expect the CBN would continue this level of frequent mop up actions given the hiatus in PMA. Investors are advised to take advantage of long-term OMO and high yield maturities that have improved last week, on the back of sell-offs.

Please see below T-Bills indicative rates for today:

FGN Bonds Market Update: Slight Sell Offs Drive Average Yield 32bps Higher; Second FGN Sukuk Offer Closes Next Monday

Trading in the FGN Bonds market started the month on a quiet note with minimal activity as investors anticipated primary FGN Bond auction calendar for the month as well as the announcement of the second FGN Sukuk offer. Also, due to more attractive long-term bills in the CBN’s OMO auctions we saw sell-offs at the short end of the curve indicating investors’ shift of interest.

Consequently, average yield across tenors inched 32 bps W-o-W from 15.2% the previous week to 15.5%. 

This week, we anticipate the quiet trading would be sustained on the back of more interests in attractive T-Bills yields as well as the FGN Sukuk offer detailed below:

(click here for summary of the Sukuk and download the subscription form here)

Please find below indicative FGN Bond rates for today: