Average Yield on NT-Bills Expands 12bps WoW as Investor Demand Fades

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Monday, November 11, 2020 / 04:30 PM / by Afrinvest Research / Header Image Credit: Moneyweb


Proshare Nigeria Pvt. Ltd.


Last week, waning demand was witnessed in the Nigerian Treasury Bills ("NT-Bills") secondary market as trading started-off on a quiet note due to depressed yields across the curve. In the first two trading sessions of the 4-Day week, most market participants stayed on the sidelines in anticipation of the NT-Bills Primary Market Auction ("PMA") which was conducted last Wednesday. Consequent on this, average yield in this space expanded 12bps W-o-W to close at 0.5%.


 

Most sell-offs were witnessed on medium-term instruments (+55bps W-o-W) as yields on 11-Feb-21 (+67bps) and 25-Feb-21 (+62bps) expanded the most. On the flipside, long-term NT-Bills dipped 15bps W-o-W to 0.4% while short-term NT-Bills remained unchanged at 0.4% with minimal interest from investors.


 

At the PMA last Wednesday, the Apex bank offered N154.4bn worth of NT-Bills which was met with a 5.3x total subscription of 8N821.5bn across all tenors, with c.85.0%of total demand on the 364-day instrument (N93.9bn offer vs. N694.9bn subscription) Thus, the strong demand pushed stop rates 66bps, 50bps and 102bps lower on the 91-, 182- and 364- Day tenors respectively.


 

Please see a detailed summary in the table below:

Auction Date

28-Oct-20

28-Oct-20

28-Oct-20

Allotment / Issue Date

29-Oct-20

29-Oct-20

29-Oct-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

49,839,651,000

 10,615,398,000

 93,915,151,000

Total Subscription (N)

84,888,071,000

41,641,448,000

694,963,628,000

Allotment (N)

7,500,000,000

6,000,000,000

140,870,200,000

Range of Bid Rates (%)

0.1800 - 1.2000

0.4000 - 1.2990

0.2900 - 2.3000

Stop Rates (%)

0.3410

0.5000

0.9800

Previous Stop Rates (%)

1.0

1.0

2.0

Bid-to-Cover Ratio

1.7x

3.9x

7.4x

Allotment Ratio

0.1x

0.1x

0.2x

 


Going into the week, Open Market Operations ("OMO") instruments worth N246.0bn will be maturing on Thursday, thus buoying liquidity levels (N794.0bn long as at last Friday). We however expect to see quieter trading sessions as investors seek better yielding opportunities. Our advice is for investors with higher risk appetite to either seek opportunities in available corporate (commercial paper) offerings, more attractive bonds or fundamentally justified equities with a long-term investment horizon.


 

FGN Bond Update: Bullish Performance as Average Yield Contracts 16bps W-o-W to 4.1%

 

Last week, the domestic bond secondary market sustained its bullish performance on the back of strong liquidity levels. As a result, average yield contracted 16bps W-o-W to close at 4.1% on Friday.


 

Major buying interests were recorded at the short and medium end of the yield curve particularly the Jan-22 (-78bps), Feb-28 (-56bps) and Apr-23 (-55bps) maturities. On the flipside, Jul-21 and Mar-27 recorded slight sell-offs increasing 9bps and 34bps W-o-W respectively.


 

We expect more interest from local investors with long-term investment horizon to filter into the FGN bond space due to relatively better yields. Thus, active investors are advised to cherry-pick short-term bonds that advanced in yields last week.



Proshare Nigeria Pvt. Ltd.


 

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