Culled—Proshare

November 18, 2019

By  Afrinvest Research 

Last week, the Nigerian Treasury Bills (“NT-Bills”) secondary market activity reversed its bearish stance from the previous week as a result of the sustained demand by local investors. Demand in “NT-Bills” intensified as unfilled bids from the Primary Market Auction (“PMA”) and maturities from OMO bills trickled into the secondary market. Thus, average yield was pressured as it settled at 10.9% W-o-W relative to the average yield at the OMO market which settled 13.3% W-o-W.

In last week’s T-Bills Primary Market Auction (“PMA”), the CBN successfully offered N125.2bn worth of instruments across 91-, 182-and 364-Day at respective stop rates of 7.80%, 9.00% and 10.00%. In line with our expectation, the auction recorded an oversubscription across all tenors, albeit, investors demand for the short tenor bill surpassed other maturities as the 91- Day bill recorded 13.3x oversubscription while the 182- and 364-Day bills recorded an oversubscription of 4.5x and 4.1x respectively.

Please see a detailed summary in the table below:

In a bid to mop liquidity from maturities last week, the Apex Bank also sold OMO bills worth of N253.8bn to the Foreign Investors and Banks across the 82-, 173- and 362-Day tenors. There was an undersubscription across the short and medium dated bills at (0.3x) and (0.2x), while the 362-Day bill recorded an oversubscription of (1.2x) respectively. 

Consequently, the market was cleared at 11.50% and 11.69%and 13.30% respectively.

Going into the week, we expect to see an improvement in system liquidity (N198.8bn short as at Friday) as N352.0bn worth of OMO maturities would hit the financial system.

Consequently, we expect NT-Bills rates to decline further due to inability of the most investors to re-invest their maturing OMO bills. We expect the CBN will sustain its weekly OMO auction to mop up excess liquidity. Investors are therefore advised to take advantage of medium to long term NT-Bills or invest in short dated FGN Bonds which provides more attractive yields. 

FGN Bonds Market Update: Bullish Momentum Sustained as Average Yield Dips 66 bps W-o-W

Similarly, the domestic FGN bonds market extended its bullish run as average yield slipped 66 bps on the back of sustained investor’s interest. The market continued to enjoy buying interest as investors continue to take position, especially in the attractive short dated bond instruments. As a result, average yield settled at 12.3% W-o-W. The 13-FEB-20 (-462bps) instrument enjoyed the most buying interest, trailed by 17-MAR-27 (-112 bps) and 22-JAN-26 (-83 bps) respectively. On the flip side, the 18-APR-37 (+3bps) suffered the most selloff. 

This week, the Debt Management Office would be re-opening Instruments worth N150.00bn across 5- (N50.00bn), 10-(N50.00bn), 30-Year (N50.00bn) tenors through a Primary Market Auction.

Please see details of the auction below:

We anticipate a sustained bullish momentum in the bonds market as investors continue to seek alternatives to reinvest maturing OMO bills. Thus, investors are advised take advantage of the short-term bonds (TTM of 2-3 years) due to their higher yields relative to long term NT-Bills.