Culled—Proshare

September 16, 2019/Afrinvest Research

Last week, the Treasury Bills (“T-Bills“) secondary market closed on bearish note as investors sold off to take position in the Primary Market and OMO auctions. Consequently, average yield across all tenors advanced 8 bps W-o-W to settle at 13.4%. Sell pressures were witnessed on the short and mid- segments of the curve as average yield rose 5bps and 39bps respectively.

In last week’s Primary Market Auction (“PMA“), the CBN successfully offered N158.7bn worth of bills across 91-, 182-and 364-Day at respective stop rates of 11.1%, 11.80% and 13.29%. As anticipated, the 91-, 182- and 364-Day instruments were oversubscribed by 2.2x, 1.7x and 2.1x respectively. 

Please see a detailed summary in the table below:

In a bid to curtail possible excess liquidity in the system as a result of expected high volume maturities, the Apex Bank issued OMO bills last week. At the OMO auction, a total of N300.0bn across the 91-,182- and 364-Day tenors was offered and due to low allotment at Wednesday’s PMA, we witnessed excess demand on the short- and long-term bills (2.8x and 1.9x respectively) while the 182-Day bill was 0.3x undersubscribed. The CBN however prorated OMO winnings on the 364-Day bill by 69.6% due to the high level of bids.

This week, the CBN is scheduled to roll over maturing bills worth N179.8bn through another PMA across the 91-(N3.0bn), 182-(N8.4bn) and 364-Day (N168.4bn) tenors. 

Please see indicative secondary market T-Bills rates below:

Going into the week, we expect to see a boost in system liquidity (N34.9bn positive as at Friday) on the back of a combined T-Bills maturities of N536.3bn from OMO (N356.5bn) and PMA (N179.8bn). As a result, we expect the CBN to intervene by mopping up excess liquidity via OMO auctions.

Investors are therefore advised to take advantage of T-Bills with attractive yields across the curve as well as primary offerings this week.

FGN Bonds Market Update: Bearish Momentum Sustained as Average Yield Advances by 5 bps W-o-W

In the same vein, the bond market sustained its bearish run as average yield trended northwards by 5 bps as a result of continued sell-off in the market. As a result, average yield settled at 14.2% W-o-W. The medium-term instruments particularly the 23-MAR-25 (+49bps) witnessed the most sell pressure. On the flip side, the 13-FEB-24(-25bps) enjoyed a slight buying interest.

This week, we anticipate a continued bearish trend in the bond market as market activities might remain tepid. Thus, investors are advised to cherry pick attractive instruments trading at a discount.

Please see indicative bond rates below: