Ahead of Next T-Bills Auction Scheduled for 13th October 2021

Proshare

Tuesday, October 12, 2021 / 03:40 PM / by Meristem Research / Header Image Credit: iStock

 

Offer Summary

The Central Bank of Nigeria (CBN) will hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on 13th of October 2021. At the PMA, Existing T-Bills totalling NGN121.66bn (NGN5.24bn, NGN8.80bn and NGN107.62bn across the 91-day, 182- day, and 364-day instruments respectively), will mature and be rolled-over.


Proshare Nigeria Pvt. Ltd.


Outlook on Yields

At the last PMA, average stop rates trended upwards to 4.50% (vs. 4.40% at the auction on the 29th of September), driven by the rate increase on the 364-day instrument to 7.50% (from 7.20% at the last auction). Rates on the 91-day and 182-day instruments, however, remained unchanged at 2.50% and 3.50%, respectively.

 

We note a decline in investors' interest on the 364-day instrument, as the total subscription on the instrument weakened to NGN166.32bn (vs. NGN238.27bn in the previous auction). Consequently, the bid-to-cover ratio declined to 1.53x (vs. 1.57x). Our prognosis is that the weakened investors' subscription at the long end of the curve influenced the direction of rates.

 

In line with recent trends, we expect rates to remain at current levels. We opine that there is little incentive for the government to increase the rates on its domestic debts, considering its increased appetite for external borrowings.

 

Meanwhile, the sentiment in the secondary market has remained bearish since the last primary market auction, as average yields increased marginally to 5.35% on the 11th of October (vs. 5.31% as of the 29th of September). With the real rates of return persistently in the negative region, investors' sentiment has remained rather tepid towards the secondary market fixed income instruments. Our prognosis is that the bearish sentiment in the fixed income secondary market will persist in the near to medium term, given the current yield and policy environment.

 

In view of the above, our rate guidance is informed by the need to strike a balance between the goals of maximizing investment returns and having a successful bid. Thus, the recommended stop rates for the respective instruments are as follows:


Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

Related News

  1. Secondary Market Maintains Bullish Run as Average Yield Declines 9bps WoW to 5.27%
  2. NGX Lists Additional Units of FGN Bonds from September 2021 Issue
  3. MTN Nigeria Plans to Issue Up to N90bn Series II Bond Under its Debut N200bn Bond Issuance
  4. Ardova Plc Series 1 Tranche A and B Bonds Issuance of Up to N22bn Now Open
  5. Nigerian Fixed Income Remains a Tough Sell
  6. Access Bank Dangles Fresh US$500m Eurobond Issue, Oversubscribed by 200%
  7. NT-Bills Update: Average Yield Contracts 30bps WoW to 5.29% Following Improved Demand
  8. October 2021 FGN Savings Bonds Offer for Subscription
  9. Ahead of Next T-Bills Auction Scheduled for 29th September 2021
  10. Fixed Income Quarterly Q3 and Q4 2021: The Fiscal to the Fore


Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP