Ahead of Next T-Bills Auction Scheduled for 29th September 2021


Tuesday, September 28, 2021 / 05:22 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 29th of September 2021. At the PMA, Existing T-Bills totalling NGN111.87bn (NGN2.26bn, NGN3.24bn and NGN106.37bn across the 91-day, 182- day, and 364-day instruments respectively), will mature and be rolled-over.

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Outlook on Yields

At the last PMA, stop rates across all offered instruments (91-day, 182-day, and 364- day) remained unchanged at 2.50%, 3.50% and 7.20% respectively. Investors' demand waned as overall bid to cover ratio declined to 0.71x (vs 1.16x recorded at the previous auction), largely driven by the reduced demand for the 364-day instrument (bid to cover: 0.69x from 1.23x in the prior auction). The weakened investors' appetite for the 364-day instrument could be attributed to the expectation of a reduced rate on the instrument, picking from previous trends. On the other hand, we observed an uptick in investors' subscription on the 91- and 182-day instruments (average subscription to offer: 0.96x vs 0.85x as at the previous auction).


In the coming auction, we expect stop rates on the 91- and 182-Day instruments to remain unchanged at previous levels. For the 364-day instrument, we anticipate a slight moderation in the stop rate. This stems from our expectation that the FG would be more inclined towards external borrowings, especially given the oversubscription witnessed on its Eurobond offering in the market recently. (Recall that the FGN raised USD4bn as against the USD3bn offered).

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Meanwhile, the secondary market reversed its bullish run since the last auction, as average T-bills yields increased to 5.37% as at 27 th September 2021 (from 4.91% at the last auction date). Although inflation rate continues to decline YoY, moderating to 17.01% in August (from 17.38% in July), it remains well above yields in the fixed income market resulting in a negative real rate of return. We therefore expect the bearish sentiment in the secondary market to persist over the near to medium term given the current yield level.


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:

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