2020 Ends on Sustained Bearish Momentum as Average NT-Bills Yield Advanced 7bps WoW%

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Monday, January 04, 2021  / 01:09 PM / by Afrinvest Research/ Header Image Credit: Wall Street Exacutive

 

Last week, which was a four-day trading week, the Nigerian Treasury Bills ("NT-Bills") secondary market kicked off on a quiet note as investors anticipated the NT-Bills Primary Market Auction ("PMA") on Wednesday. As a result, the NT-Bills secondary market sustained its bearish run as average yield across all tenors marginally expanded by 7bps W-o-W to settle at 0.46% on Thursday (31-Dec-20) from 0.39% the previous week.

 

Consequently, the most selloffs was experienced in the medium- term maturities W-o-W, particularly the 10-Jun-21 (+18bps), 1-Jun-21 (+12bps), and 15-Jul-21(+11bps).

 

At the PMA, the Apex bank offered N74.8bn worth of NT-Bills against the N171.4bn total subscription as all tenors were oversubscribed with the 91-Day instrument recording the most buying interest, 3.1x oversubscribed (N10.0bn offered as against N30.5bn subscribed). In more detail, the stop rate for the 91-Day tenor marginally declined 1bp while stop rates on the 182-Day remained at 0.50% and the 364-Day rate inched to 1.21% as the CBN fully allotted the amount offered.

 

Please see a detailed summary in the table below:

Auction Date

30-Dec-20

30-Dec-20

30-Dec-20

Allotment / Issue Date

31-Dec-20

31-Dec-20

31-Dec-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

10,000,000,000

20,000,000,000

44,837,000,000

Total Subscription (N)

30,554,891,000

28,899,430,000

111,970,110,000

Allotment (N)

10,000,000,000

20,000,000,000

44,837,000,000

Range of Bid Rates (%)

0.0250 - 1.8000

0.2000 - 2.4000

0.5110 - 4.2990

Stop Rates (%)

0.0350

0.5000

1.2100

Previous Stop Rates (%)

0.0480

0.5000

1.1390

Bid-to-Cover Ratio

2.5x

1.4x

3.1x

Allotment Ratio

0.3x

0.7x

0.4x


On Thursday, the CBN also conducted an Open Market Operation ("OMO") auction to mop up excess liquidity in the system. A total amount of N80.0bn was offered and sold across the 96-Day, 187-Day, and 362-Day instruments with all tenors were oversubscribed. This was met with a total subscription of N435.6bn showing a bid to cover ratio of 4.3x, 5.3x, and 5.7x across the short-, medium- and long-term OMO bills respectively.

 

Going into the week, we expect investor sentiment to remain subtle due to relatively low yields on offer in the secondary market. Nevertheless, we anticipate CBN's intervention in mopping up excess financial system liquidity which stood at N966.9bn (long as at Thursday, 31-Dec-20)

 

We also maintain our advice that investors can hunt for bargains in attractive instruments that advanced last week across the yield curve or seek for relatively higher yielding alternatives in corporate offerings.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

29-Apr-21

115

1.20

1.20

13-May-21

129

1.50

1.51

15-Jul-21

192

1.95

1.97

26-Aug-21

234

2.10

2.13

25-Nov-21

325

2.71

2.78

Rates are valid till 01:45pm today (04-Jan-2021)


*Please note that the minimum subscription for T-Bills is N100,000.00



Proshare Nigeria Pvt. Ltd.




FGN Bonds Update: Bearish Streak Persists on Domestic Bonds as Average Yield Advances 21bps W-o-W to 6.1%


The FGN bond secondary market retained its bearish outing as domestic players closed their year-end positions. As a result, average yields across the curve advanced 21bps W-o-W to 6.1% from 5.9% the previous week.

 

Particularly, the Jan-26, Mar-27 and Apr-29 instruments witnessed the most sell-offs, expanding 113bps, 92bps and 81bps W-o-W respectively.


Going into the week, we expect the bearish momentum to be sustained in the bond secondary market as investors bargain hunt attractive instruments. Thus, investors are advised to cherry pick higher yielding instruments trading at a discount particularly at the short and medium end of the curve.

 

Please see indicative secondary market bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

1.10

16.39

116.05

Apr-23

3

2.05

12.75

124.02

Mar-24

4

2.55

14.20

135.50

Mar-25

5

3.80

13.53

137.58

Jan-26

6

5.05

12.50

132.81

Mar-27

7

5.70

16.29

154.64

Feb-28

8

5.75

13.98

147.58

Jul-34

14

6.80

12.15

146.84

Mar-36

16

6.95

12.40

150.64

Apr-37

17

7.00

16.25

189.02

Apr-49

29

7.10

14.80

193.37

Rates are valid till 01:45pm today (04-Jan-2021)


*Please note that the minimum subscription for Bonds is N20,000,000.00



Proshare Nigeria Pvt. Ltd.



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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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