Tepid Performance Persists as Average Yield on NT-Bills Closes Flat at 6.50% WoW

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Monday, June 28, 2021 / 02:42 PM / By Afrinvest Research / Header Image Credit: Pexels


Proshare Nigeria Pvt. Ltd.


Last week, activities in the Nigerian Treasury Bills ("NT-Bills") secondary market started off on a calm note with low volumes of trades witnessed across the curve. This was on the back of tightened liquidity which was at N105.3bn short as at Wednesday (from N21.3bn negative on Monday). Consequently, average yield across the curve remained the same at 6.52%. 

Specifically, there were mild sell-offs at the shorter end of the curve especially the 29-Jul-21 maturity, which inched northwards by 13bps W-o-W, while the mid and long-term bills slightly dipped an average 1bp apiece.

Going into the week, a total of N81.7bn worth of maturing NT-Bills will be rolled over by the Apex Bank at the Primary Market Auction ("PMA") slated for Wednesday, 30th June, 2021 across the 91-, 182- and 364-Day tenors.


Please see details of the auction in the table below:

Auction Date

30-July-21

30-July-21

30-July-21

Allotment Date

01-July-21

01-July-21

01-July-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Value on Offer (N)

2,878,850.00

20,000,000.00

58,857,012.00

Previous Stop Rates (%):

2.50

3.50

9.40

Expected Stop Rate Range (%):

1.80 - 2.20

2.90 - 3.50

8.50 - 9.50


 

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

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

16-Sep-21

80

2.45

2.46

28-Oct-21

122

3.95

4.00

25-Nov-21

150

4.35

4.43

31-Mar-22

276

5.64

5.89

26-May-22

332

6.76

7.20

09-Jun-22

346

7.16

7.68

Rates are valid till 01:45 pm today (28-Jun-21)

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


This week, we expect the activity levels in the NT-Bills secondary market to improve due to improved liquidity levels in the financial system, which stood at N109.4bn long last Friday. Therefore, we advise investors to take advantage of the relatively attractive bills along the curve, while also remaining alert for more commercial paper offerings that might be announced.


FGN Bonds Update: Bullish Run Persists as Average Yield Dips 7bps W-o-W to 11.94%


Last week, FGN bond secondary market resumed on a quiet note, as market players shifted focus to the bond PMA conducted last Wednesday. As the week progressed, the market turned slightly bullish as investors took advantage of elevated yields levels in the market. Accordingly, average yield across all maturities dipped 7bps W-o-W to settle at 11.94% from 12.01% the previous week.

Specifically, the average yields on medium- and long-term bonds dipped 11bps and 14bps W-o-W respectively, while the average yield in the short term bonds inched 3bps higher W-o-W.  Particularly, the instruments that recorded the most buying interest were the 18-Apr-37, 24-Jul-45 and 18-Mar-36 maturities, with yields contracting 63bps, 35bps, and 34bps W-o-W respectively.

At the PMA that held on Wednesday, the Debt Management Office ("DMO") total offer of N150.0bn was met with strong demand, recording an overall subscription ratio of 1.3x. Interestingly, the DMO sold more than it offered across the three maturities (MAR 2027, MAR 2035 and MAR 2050) in line with the Federal Government’s plan to further increase domestic borrowings, bringing total amount allotted to about N325.8bn. Furthermore, stop rates improved to 12.74% (-36bps), 13.50% (-50bps) and 13.70% was maintained at the MAR 2050 maturity.

Please see a detailed summary of the FGN bond PMA below:

 

6.2884% FGN MAR 2027 (Re-opening)

12.50% FGN MAR 2035 (Re-opening)

12.98% FGN MAR 2050 (Re-opening)

Term-To-Maturity

5 Years, 9 Months

13 Years, 9 Months

28 Years, 9 Months

Amount on Offer (N)

50,000,000,000.00

50,000,000,000.00

50,000,000,000.00

Total Subscription (N)

66,214,550,000.00

127,454,344,000.00

223,818,517,000.00

Amount Allotted (N)

50,805,450,000.00

103,899,343,000.00

171,093,317,000.00

Stop rates

12.7400

13.5000

13.7000

Bid to Cover Ratio

1.3x

1.2x

1.3x

Subscription Ratio

1.3x

2.6x

4.5x

Stop Yield (%)

12.74

13.50

13.70

Previous Auction Stop Yield (%) - May 2021

13.10

14.00

--



Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

10.70

12.75

103.29

Mar-24

3

10.70

14.20

108.00

Mar-25

4

10.90

13.53

107.85

Jan-26

5

11.55

12.50

103.28

Mar-27

6

11.65

16.29

118.92

Feb-28

7

11.65

13.98

110.55

Jul-34

13

12.00

12.15

100.95

Mar-36

15

12.30

12.40

100.63

Apr-37

16

12.30

16.25

127.19

Apr-49

28

12.50

14.80

117.72

Rates are valid till 01:45 pm today (28-Jun-21) 
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Going into the week, we expect buying interests to persist as unmet bids from the PMA may filter into the secondary market given the improved supply in the FGN Bonds space. We therefore advise investors to take advantage of maturities with improved yields across the curve, particularly at the short-end of the curve.


Proshare Nigeria Pvt. Ltd.


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