NT-Bills Yields Advance 0.7% WoW to 5.76% Across Tenors in Secondary Market

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Monday, May 24, 2021   /05:09 PM / by Afrinvest Research / Header Image Credit: LDS


Proshare Nigeria Pvt. Ltd.


The Nigerian Treasury Bills ("NT-Bills") secondary market performance unsurprisingly maintained a bearish outing throughout last week, due to persistently low financial system liquidity (N192.0bn negative as at last Monday, 17-May-21). Consequently, average yield across all tenors inched 70bps higher W-o-W to 5.76% from 5.06% the previous week.

In more detail, medium-term NT-Bills gained the most, up 1.27% W-o-W with 11-Nov-21 (+1.27%) and 16-Sep-21(+1.39%) advancing the most. Also, average yields on short- and long-term NT-Bills improved 0.28% and 0.47% W-o-W respectively. Slight demand was however witnessed on some short-term NT-Bills, as the 10-Jun-21 instrument was the sole decliner, shedding 44bps W-o-W.

This Wednesday, the Central Bank of Nigeria ("CBN") is slated to conduct its bi-weekly NT-Bills Primary Market Auction ("PMA") rolling over a total of N63.2bn across the 91-Day (N24.2bn), 183-Day (N19.2bn), and 364-Day (N19.8bn) tenors. We expect decent demand levels as investors anticipate slightly improved yields.

Please see more details in the table below:

Auction Date

26-May-21

26-May-21

26-May-21

Allotment Date

27-May-21

27-May-21

27-May-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Value on Offer (N)

24,175,790.00

19,157,656.00

19,842,352.00

Previous Stop Rates (%)(13-May-2021)

2.50

3.50

9.75

Expected Stop Rate Range (%)

1.90 - 2.50

2.90 - 3.50

9.00 - 10.00

 


We expect NT-Bills secondary market players to remain on the sidelines this week, in anticipation of the PMA. Furthermore, as financial system liquidity remains pressured (N577.6bn negative as at Friday, 21-May-21), we believe the bearish run would be sustained this week.

Investors are advised to remain cautious, taking position in short to medium term NT-Bills as we expect further advancement in yields during the week. In addition, qualified investors can partake in the NT-Bills PMA and stay alert for prime corporate offerings (commercial papers or bonds) that may offer higher yields.



Please see the indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

26-Aug-21

94

2.35

2.36

16-Sep-21

115

3.05

3.08

28-Oct-21

157

4.33

4.41

25-Nov-21

185

4.70

4.81

10-Feb-22

262

5.10

5.29

31-Mar-22

311

6.46

6.84

Rates are valid till 01:45 pm today (24-May-21)

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


FGN Bond Update: Renewed Sell Pressures Following Subdued Liquidity Levels as Average Yield Expands 15bps W-o-W to 12.44%

As expected, the FGN Bond secondary market recorded a slowdown in buying activities last week, despite the positive inflation data released by the National Bureau of Statistics ("NBS") for April, 2021 which showed a 5bps moderation - for the first time in months - to 18.12% (from 18.17% in March 2021).

At the start of the week, secondary market bonds traded on a flat note with the mild sell-offs unable to outweigh the pockets of demand recorded along the curve. However, as the week progressed, sell pressures were renewed as investors exited positions in reaction to higher yields at the Primary Market Auction ("PMA") and to free up funds due to the pressured liquidity levels.

As a result, the average yield across the secondary market bond curve expanded 15bps W-o-W to 12.44% from 12.29% the previous week. Particularly, the 27-JAN-22, 26-APR-49, and 27-MAR-50 maturities advanced 82bps, 27bps and 24bps W-o-W respectively.

At the PMA on Wednesday, 19-May-21, the Debt Management Office's ("DMO") total offer of N150.0bn across the 10-, 15- and 30-Year tenors witnessed strong demand, recording a total subscription ratio of 1.9x. In addition, the long-term offer enjoyed the most demand, recording a subscription ratio of 3.7x while the medium-term offer also recorded significant demand with a subscription ratio of 1.1x. On the flip side, the 5-Year offer received the weakest demand from investors, recording a subscription ratio of 0.7x. Furthermore, stop rates improved to 13.10% (+85bps), 14.00% (+66bps), and 14.20% (+35bps) respectively on the short, medium, and long term offers.

Please see below details of the FGN Bond PMA:

 

16.2889% MAR 2027

12.50% MAR 2035

14.80% FGN APR 2049

Auction Date:

19-May-21

19-May-21

19-May-21

Tenors:

10-Yr Re-opening

15-Yr Re-opening

30-Yr Re-opening

Term-To-Maturity:

5 Years, 10 months

14 Years, 1 months

24 Years, 5 months

Amount Offered:

50,000,000,000.00

50,000,000,000.00

50,000,000,000.00

Subscription:

37,240,000,000.00

57,350,000,000.00

187,380,000,000

Amount Allotted:

20,140,000,000.00

41,150,000,000.00

113,950,000,000.00

Range of Bids:

8.1441% - 13.0000%

10.0000% - 13.5000%

10.0000% - 15.0000%

Stop Rates:

13.1000%

14.0000%

14.2000%

Previous Stop Rates:

12.2500%

13.3400%

13.8500%

Bid to Cover Ratio:

1.8x

1.4x

1.6x

Allotment Ratio:

0.5x

0.7x

0.6x

Subscription Ratio:

0.7x

1.1x

3.7x

 

This week, we expect some sell-offs to persist as liquidity levels remain pressured and as investors seek higher yields in the market. In addition, we expect investors to trade more cautiously as they await the outcome of the upcoming Monetary Policy Committee ("MPC") meeting scheduled to hold this week. Thus, we advise investors to trade cautiously and take advantage of relatively attractive long-dated offers along the yield curve and possible corporate offerings.



Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

9.55

12.75

105.49

Mar-24

3

10.80

14.20

108.00

Mar-25

4

10.80

13.53

108.34

Jan-26

5

12.05

12.50

101.53

Mar-27

6

12.35

16.29

115.94

Feb-28

7

12.35

13.98

107.27

Jul-34

13

13.30

12.15

92.90

Mar-36

15

13.30

12.40

94.19

Apr-37

16

13.30

16.25

119.28

Apr-49

28

13.40

14.80

110.14

Rates are valid till 01:45 pm today (24-May-21) 


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


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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