Flat Performance in NT-Bills Secondary Market as Average Yield Hovers Around 0.4%

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Monday, December 21, 2020 / 01:46 PM / By Afrinvest Research / Header Image Credit: Invest Small


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Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market sustained quiet trading sessions throughout the week as investor interest waned on the back of low yields on offer. Consequent on this, average yield across the curve closed flat at 0.4%.

 

All segments dipped W-o-W, save for long-dated T-Bills which advanced marginally 4bps with 16-Sep-20 (+16bps) and 28-Oct-20 (+15bps) instruments advancing the most. While the short- and medium-term bills dipped 4bps and 20bps respectively, offsetting the slight bearish performance on the long-term maturities.

 

Liquidity levels also stayed decent (N747.0bn positive as at Friday 18-Dec-20) despite the NT-Bills and FGN Bond Primary Market Auctions ("PMA") conducted during the week.

 

At the NT-Bills PMA, the Apex bank offered N7.0bn worth of NT-Bills and mopped up the same amount despite 9.1x, 5.3x and 31.0x oversubscription across the 91-, 182-, and 364-Day tenors respectively.

 

Please see more details in summary below:

Auction Date

16-Dec-20

16-Dec-20

16-Dec-20

Allotment / Issue Date

17-Dec-20

17-Dec-20

17-Dec-20

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer (N)

   2,000,000,000.00 

   2,000,000,000.00   

   3,000,000,000.00   

Subscription (N)

18,213,391,000.00   

 10,266,851,000.00

 93,046,267,000.00

Allotment (N)

   1,500,000,000.00

   1,700,000,000.00

   3,800,000,000.00   

Range of Bid Rates (%):

0.0090 - 1.8000

0.0300 - 2.9800

0.4900 - 10.0000

Previous Stop Rates 09-Dec-20 (%):

0.010

0.600

3.200

Stop Rates (%):

0.048

0.500

1.139

Subscription Ratio

9.1x

5.1x

31.0x

Allotment Ratio

0.8x

0.9x

1.3x

 

Going into the week, we expect investor sentiment to remain tapered as market players trade cautiously due to unattractive yields on offer despite the expected N250.5bn worth of OMO maturities scheduled to hit the system on Thursday and bolster liquidity levels. However, due to limited options available for risk averse investors, we expect mandate trickles. We advise that investors hunt for relatively attractive money market offers including private company issues.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

11-Mar-21

80

1.15

1.15

13-May-21

143

1.75

1.76

15-Jul-21

206

2.20

2.23

26-Aug-21

248

2.30

2.34

28-Oct-21

311

2.76

2.83

Rates are valid till 01:45pm today (21-Dec-2020)

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

 

FGN Bond Update: Bearish Trend Persists on Domestic Bonds as Average Yield Advances 61bps W-o-W to 5.4%


Last week, the bearish sentiment in the FGN bond space was sustained as investors anticipated the FGN bond auction last Thursday (the final auction of 2020) as well as inflation data for November released by the Nigerian Bureau of Statistic (14.89%). Accordingly, average yield across benchmark tenors advanced 61bps W-o-W to close at 5.4% on Friday.


Yields at the long end of the curve advanced the most +71bps W-o-W with the JUL-34 (+1.8%) and APR-37 (+1.9%) maturities witnessing the most sell-offs.


At the bond PMA, the Debt Management Office ("DMO") offered N60.0bn across re-opening bonds MAR-35 and JUL-45 which were 3.0x and 1.4x over subscribed as yields advanced 194bps and 122bps  respectively. The DMO however allotted N30.0bn across offerings.

 

Please see more details in summary below:

12.50% FGN MAR 2035

(Re-opening)

9.80% FGN JUL 2045

(Re-opening)

Term-To-Maturity

14 Years, 3 Months

24 Years, 7 Months

Amount on Offer (N)

30,000,000,000.00

30,000,000,000.00

Total Amount of Bids Received (N)

90,885,600,000.00

43,170,695,000.00

Total Amount Allocated (N)

20,000,000,000.00

10,000,000,000.00

All Bids Awarded At (Price/Yield)

149.7732/6.9450

132.6247/7.0000

Bid to Cover Ratio

4.5x

4.3x

Allotment Ratio

0.6x

0.3x

Previous Yield (Nov 2020) %

5.00%

5.79%

Stop Yield %

6.95%

7.00%

 

As domestic market players close their books for the year we anticipate sustained bearish sentiments in the local bond space. Thus, we advise investors to take advantage of relatively higher yield in the bond space.

 

Please see indicative secondary market bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

1.00

16.39

116.75

Apr-23

3

1.20

12.75

126.67

Mar-24

4

1.40

14.20

140.30

Mar-25

5

1.55

13.53

149.15

Jan-26

6

4.30

12.50

137.08

Mar-27

7

4.50

16.29

163.49

Feb-28

8

4.70

13.98

155.93

Jul-34

14

6.40

12.15

151.62

Mar-36

16

6.40

12.40

157.84

Apr-37

17

6.40

16.25

198.84

Apr-49

29

6.65

14.80

203.35

Rates are valid till 01:45pm today (21-Dec-2020)

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


Proshare Nigeria Pvt. Ltd.


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