Ahead of Next Treasury Bills Auction Scheduled for 31st of March 2021


Tuesday, March 30, 2021 / 06:11 PM / By Meristem Research / Header Image Credit: Businessamlive


Offer Summary

The Central Bank of Nigeria (CBN) will hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on 31st of March 2021. Existing T-Bills worth NGN10.00bn, NGN17.60bn and NGN68.08bn across the 91-day, 182-day, and 364-day instruments respectively will mature, and the CBN will re-issue NGN10.00bn, NGN17.60bn and NGN68.08bn across same tenors respectively.


Outlook on Yields

For the second consecutive time, CBN maintained prior auction stop rates on the 91 and 182-Day instruments, while it increased the stop rate on the 364-Day instrument by 50bps (vs +100bps at the previous auction). This further confirmed our earlier suspicion that rates may be approaching a plateau. Although there is a strong case for higher interest rates given high inflationary pressures, the burden of repayments on the government is a cause for concern which the CBN is expected to take seriously. Furthermore, investors' appetite remained strong as the overall bid-to-cover ratio increased significantly to 2.48x from 1.81x at the previous auction. We, therefore, advise cautious optimism on the part of investors for higher interest rates, particularly on the shorter end of the offer. At the next auction, therefore, we expect stop rates to hover around current levels given that demand is expected to remain strong.


The secondary market continued to witness bearish sentiment since the last PMA, with average Treasury bills yield rising from 3.05% recorded on the date of the last auction to 3.97% as at 26th March 2021. We maintain our expectation that yields in the secondary market will continue to rise as long as they remain significantly below PMA rates. The secondary market will, thus, continue to witness a repricing over the near term.


In view of the foregoing, we advise rates which aim to achieve a balance between the goal of maximizing investment returns and that of having a successful bid. The recommended stop rates for the respective instruments are listed below:

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