PMA Holds on Wednesday; NT-Bills Average Yield Improves 2bps WoW

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Monday, June 07, 2021 / 12:40 PM / by Afrinvest Research / Header Image Credit: Bybit Learn


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Average yield in the Nigerian Treasury Bills ("NT-Bills") secondary market rose marginally by 2bps W-o-W to close at 6.26% from 6.24% in the previous week thereby sustaining a bearish run, despite improved financial system liquidity (N70.0bn long as at last Friday, 04-Jun-21).


In more detail, we saw increased buying interest on shorter-dated instruments as investors anticipate higher yields in the near term. Thus, the average yield at this end of the curve declined 26bps W-o-W from 4.28% to close at 4.02%. Similarly, the average yield in the medium-term shed 4bps to close at 5.51% from 5.55%. On the flip side, long-term bills saw increased sell-off as average yield surged 24bps W-o-W to close at 8.23% from the previous week's close of 7.98%.


Specifically, longer-dated bills like the 17-MAR-22, 10-MAR-22, and 24-FEB-22 saw the most decline as their yields appreciated W-o-W by 39bps, 37bps, and 32bps respectively while the instruments with the most buying interest were on the shorter end of the curve with the 1-JUL-21, 15-JUL-21, and 29-JUL-21 dropping 36bps, 32bps, and 28bps in that order.


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 N91.2bn across the 91-Day, 183-Day, and 364-Day tenors. We expect decent demand levels as investors anticipate slightly improved yields.

 

This week, we expect the NT-Bills Secondary market participants to be relatively quiet as they position for the PMA. Investors are thus advised to remain cautious and position in attractive yields across all tenors (particularly at the mid-end of the curve).


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

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

16-Sep-21

101

3.30

3.33

28-Oct-21

143

4.75

4.84

25-Nov-21

171

5.23

5.36

10-Feb-22

248

6.10

6.36

28-Apr-22

325

7.26

7.76

Rates are valid till 01:45 pm today (07-Jun-21)

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


FGN Bond Update: Renewed Buying Forces Average Yield Down 31bps W-o-W to 12.21%


The FGN bond secondary market surprisingly saw buying interest from investors across all tenors on the back of improved yield in the previous weeks thus, shedding 31bps across all maturities and closing at 12.21% W-o-W from the previous 12.52%.

 

Specifically, the short-end of the curve saw the most buying interest as the average yield dipped 37bps W-o-W to close at 9.70% from 10.06%. The average yield at the mid-end of the curve also saw impressive attention from investors with a 27bps reduction in its previous yield of 13.06% to 12.79% W-o-W. Similarly, the long end of the curve shed 30bps W-o-W to close at 13.78%.


To elaborate, all the instruments in the market dipped except for the JAN-22 instrument which closed flat at 7.31%. The instruments that declined the most were the MAR-24 (54bps), MAR-25 (50bps), JAN-26 (46bps), and MAR-36 (46bps) in that order.


Going into the week, we expect a quiet but sustained bullish trend in the secondary market, particularly at the short-end of the curve, and advise investors to position in attractive yields in the market across all tenors.

Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

           10.80

            12.75

                  103.22

Mar-24

3

           10.95

            14.20

                  107.54

Mar-25

4

           11.30

            13.53

                  106.68

Jan-26

5

           12.60

            12.50

                    99.62

Mar-27

6

           11.90

            16.29

                  117.90

Feb-28

7

           11.95

            13.98

                  109.15

Jul-34

13

           12.80

            12.15

                    95.88

Mar-36

15

           12.80

            12.40

                    97.33

Apr-37

16

           12.80

            16.25

                  123.14

Apr-49

28

           13.00

            14.80

                  113.39

Rates are valid till 01:45 pm today (07-Jun-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


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