Sustained Bearish Performance as NT-Bills Average Yield Expands 64bps

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Monday, March 22, 2021 / 02:27 PM / by Afrinvest Research / Header Image Credit: Kiplinger


Proshare Nigeria Pvt. Ltd.


Last week, bearish sentiments persisted on all trading sessions at the Nigeria Treasury Bills ("NT-Bills") secondary market. This was due to tight liquidity levels (N72.1bn negative as at 15-Mar-2021), and investors' expectation of higher-stop rates at the Primary Market Auction ("PMA") conducted by the Central bank on Wednesday, 17-Mar-2021. Consequently, average yield across all NT-Bills instruments advanced 64bps W-o-W to 3.5%

 
In more detail, short-term yields inched 80bps higher W-o-W as investors sold off to fund their obligations. In the same vein, medium and long-dated NT-Bills improved 48bps and 67bPs respectively as all instruments gained W-o-W, save for the 15-Jul-21 and 29-Jul-21 instrument which contracted 41bps and 14 bps w-o-w respectively.
 
At the PMA, the Apex bank offered a total of 
N47.0bn across the 90-, 182- and 364-Day tenors which witnessed high demand with Bid-to-Cover ratios of 2.7x, 1.8x, and 1.9x respectively. Local investors also continued to seek higher yields, bidding up to 11.2999% on the 364-Day bill.

 
Please see below details of the PMA result: 

Auction Date 

17-Mar-21 

17-Mar-21 

17-Mar-21 

Allotment/Issue Date 

18-Mar-21 

18-Mar-21 

18-Mar-21 

Tenor 

(91-Day) 

(182-Day) 

(364-Day) 

Offer (N) 

1,500,000,000.0  

8,385,196,000.0 

37,176,061,000.0

Subscription (N) 

 6,729,740,000.0  

10,631,977,000.0 

 99,490,759,000.0  

Allotment (N) 

 2,523,738,000.0  

 5,913,188,000.0 

 53,464,249,000.0  

Range of Bids (%): 

1.89000 - 8.0000 

3.0000 - 9.0000 

5.9990 - 11.2999 

Previous Stop Rates (%) 10-Mar-21: 

2.00 

3.50 

6.50 

Current Stop Rates (%): 

2.00 

3.50 

7.00 

Bid-to-Cover Ratio 

2.7x 

1.8x 

1.9x 


Going into the week, we anticipate more activity in the NT-Bills secondary market due to improved financial system liquidity levels (N380.8bn long as of 19-Mar-2021). We also expect 
N50.0bn worth of maturing Open Market Operations ("OMO") bills to further buoy liquidity.
 
We expect investors to take advantage of the increased yields in the secondary market, while investors with longer investment horizons may position in the FGN bond auction this week. However, we foresee the uptrend in yields to be sustained as major market players continue to anticipate higher returns.
 
Please see indicative secondary market NT-Bills rates below:  

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

10-Jun-21

80

1.05

1.05

09-Sep-21

171

3.03

3.07

28-Oct-21

220

4.45

4.57

25-Nov-21

248

4.80

4.96

10-Feb-22

325

5.16

5.41

Rates are valid till 01:45 pm today (22-Mar-21) 
*Please note that the minimum subscription for T-Bills is N100,000.00 
 
FGN Bonds Update: Average Yield Inched 26bps Higher W-o-W to 9.5%; FGN Bonds Auction Holds on Wednesday.

 
The domestic bonds market performance turned bearish last week, on the back of weak macroeconomic data releases: Consumer Price Index ("CPI") at 17.33% and the Unemployment rate at 33.3%. Furthermore, investors anticipated improved yields in the primary market and are on standby for the Monetary Policy Committee ("MPC") meeting schedule to hold today and Tuesday.
 
Consequently, the average yield across all bonds instruments advanced 26bps W-o-W to 9.5% as against 9.3% the previous week. Specifically, the average yield on the short-, medium- and long-term bonds gained by 0.4%, 0.3%, and 0.1% respectively. On the flip side, the MAR-2025 instrument enjoyed the most demand from investors contracting 59bps W-o-W.
 
This week, we expect most investors on the sidelines in anticipation of MPC data and to position at the bonds PMA where the Debt Management Office ("DMO") would re-open offers worth N150.0bn.
 
Please see details of this week's auction below: 

Bond

16.29% FGN MAR 2027

12.50% FGN MAR 2035

 9.80% JULY 2045

10-Year Re-opening

15-Year Re-opening

 25-Year Re-opening

Term to  Maturity

6 Years, 1 Month

14Years

 24 Years, 4 Months

Range of Amount on Offer  (Nbn)

 40.0 - 50.0

40.0 - 50.0

 40.0 - 50.0

 
 
Please see indicative secondary market bonds rates below:  

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

23-Apr

2

5.30

12.75

114.61

24-Mar

3

6.30

14.20

121.15

25-Mar

4

6.50

13.53

124.45

26-Jan

5

8.90

12.50

113.88

27-Mar

6

9.20

16.29

132.07

28-Feb

7

9.30

13.98

123.49

Jul-34

13

10.60

12.15

110.89

Mar-36

15

10.65

12.40

112.96

Apr-37

16

10.70

16.25

142.13

Apr-49

28

10.70

14.80

136.24

Rates are valid till 01:45 pm today (22-Mar-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00 

Proshare Nigeria Pvt. Ltd.


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