January 14, 2019/Afrinvest Research
The Treasury Bills (“T-Bills”) secondary market last week reversed the bearish performance recorded in the previous week – which so far has indicated a W-o-W undulating trend – as investors interest was centred on the short tenored bills. Consequent on this, average yield across tenors declined 9bps W-o-W from 15.4% recorded in the previous week to settle at 15.3%. This was supported by the drop in the yields on the short-term maturities, particularly the 18-Apr-19 (-180 bps W-o-W) and 24-Jan-19 (-84bps W-o-W) bills.
During the week, the Apex bank floated two Open Market Operations (“OMO”) auctions. The first auction held on Tuesday across the 107, 170 and 317-day tenors, with a total offer of N60.0bn having a bid-to-cover ratio of 0.2x (N10.7bn) which indicated low demand by investors due to tight system liquidity. However, significant demand was witnessed at the second OMO auction on the back of maturing bills, which held on Thursday. The CBN offered N400.0bn and was met with a total subscription of N297.5bn, resulting in a bid-to-cover ratio of 0.7x.
This week, the CBN will be conducting a Primary Market Auction (“PMA”) where a total of N225.4bn worth of maturing T-Bills will be rolled over the 91 (N5.8bn), 182 (N26.6bn) and 364-day (N193.0bn) tenors. Please see below our PMA expectations:
| Tenor | 91-Day | 182-Day | 364-Day |
| Offer Amount (N) | 5,849,034,000 | 26,600,000,000 | 193,000,000,000 |
| Last Stop Rate (%) | 10.8990% | 13.1000% | 14.5000% |
| Expected Stop Rate Range (%) | 10.90%-11.00% | 13.10%-13.40% | 14.50%-14.60% |
Furthermore, we expect frequent OMO mop-ups by the Apex bank to persist this week as OMO and T-Bills maturities worth N786.4bn are scheduled to hit the system on Thursday, buoying system liquidity (N293.1bn negative as at Friday). Therefore, we advise investors to take advantage of bills with attractive yields especially at the longer end of the curve.
Please see below T-Bills indicative rates for today:
| Maturity | Tenor (Days) | Rate (%) p.a. | Yield (%) p.a. |
| 14-Feb-19 | 31 | 11.75 | 11.87 |
| 07-Mar-19 | 52 | 11.20 | 11.38 |
| 14-Mar-19 | 59 | 11.95 | 12.19 |
| 02-May-19 | 108 | 11.75 | 12.17 |
| 23-May-19 | 129 | 11.86 | 12.38 |
| 24-Oct-19 | 283 | 14.04 | 15.76 |
| 09-Jan-20 | 360 | 14.06 | 16.32 |
| OMO Auction | c.200 | 12.50 | 13.55 |
| OMO Auction | c.350 | 14.20 | 16.45 |
Rates are valid till 01:45pm today (14-Jan-19)
*Please note that the minimum subscription for T-Bills is N100,000.00
FGN Bonds Update; Investors Buying Interest Persists as Average Yields decline 7bps W-o-W to 15.1%
In the bonds market last week, performance was largely bullish as investors’ buying interest persisted. As a result, average yield across tenors trended southwards by 7bps W-o-W as investors took advantage of the attractive yields on the shorter end of the curve especially on the 12-Apr-19 maturity which declined 101bps W-o-W.
Going into the week, we do not expect this bullish trend to persist due to the more attractive yields in the T-Bills market currently. We however advise interested investors to take position in the long-dated bonds with more attractive yields.
Please find below indicative FGN Bond rates for today:
| Bond | Tenor (Years) | Yield (%) | Coupon (%) | Implied Price (N) |
| Feb-20 | 2 | 14.55 | 15.54 | 100.92 |
| Jul-21 | 3 | 15.20 | 14.50 | 98.59 |
| Jan-22 | 4 | 14.75 | 16.39 | 103.88 |
| Mar-24 | 6 | 14.85 | 14.20 | 97.65 |
| Jan-26 | 8 | 15.40 | 12.50 | 87.81 |
| Mar-27 | 9 | 15.30 | 16.29 | 104.46 |
| Feb-28 | 10 | 15.36 | 13.98 | 92.03 |
| Jul-34 | 16 | 15.25 | 12.15 | 81.75 |
| Mar-36 | 18 | 15.29 | 12.40 | 82.55 |
| Apr-37 | 19 | 15.26 | 16.25 | 105.97 |
Rates are valid till 01:45pm today (14-Jan-19)
*Please note that the minimum subscription for Bonds is N20,000,000.00
