Average NT-Bills Yield Remains Unchanged at 1.8% as Investors Partake in PMA

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Monday, August 03, 2020 / 12:29 PM / By Afrinvest Research / Header Image Credit: Voto en Blanco

 

Proshare Nigeria Pvt. Ltd.


Last week, trading on the Nigerian Treasury Bills ("NT-Bills") secondary market was relatively quiet as unattractive yields and limited supply of bills dragged activity all through the 3-Day week. Furthermore, investors stayed on sidelines, awaiting the Primary Market Auction ("PMA") that held on Wednesday.

 

Consequently, average yield closed flat at 1.8% despite the healthy liquidity level (c. N769.2bn long as at Wednesday).

 

In more detail, the 10-Sep-20 and 17-Sep-20 NT-Bill maturities witnessed mild buying interests, shedding 3bps and 5bps W-o-W respectively. While the 15-Oct-20 (+10bps) and 01-Oct-20 (+3bps) bills witnessed slight sell-offs and other instruments across the curve traded flat.

 

At Wednesday's PMA, the CBN rolled over a total of N266.0bn across the 91-, 182- and 364-Day tenors which was followed by strong demand of N468.3bn as all tenors were oversubscribed. Most demand was particularly recorded on the 182-day tenor which had a 2.9x bid-to-cover ratio. However, the Apex bank only allotted the total amount offered. Thus, average stop rates declined across the curve to 2.0% (-12bps).

 

Please see a detailed summary of the PMA results below:

Auction Date

29-Jul-20

29-Jul-20

29-Jul-20

Allotment / Issue Date

30-Jul-20

30-Jul-20

30-Jul-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

49,839,651,000

54,592,585,000

161,522,566,000

Total Subscription (N)

94,386,339,000

158,786,602,000

215,093,647,000

Allotment (N)

49,839,651,000

54,592,585,000

161,522,566,000

Range of Bid Rates (%)

1.0000 - 9.0000 

1.5000 - 3.0100

2.7000 - 12.8000

Stop Rates (%)

1.2000

1.5000

3.4000

Previous Stop Rates (%)

1.3000

1.8000

3.3500

Bid-to-Cover Ratio

1.9x

2.9x

1.3x

Allotment Ratio

0.5x

0.3x

0.8x

 

This week, we expect to see more demand in the NT-Bills space due to the unmet bids from last week's PMA. However, this may be slightly impacted by strained liquidity levels in the absence of inflows to bolster liquidity in the system during the week.

 

Investors are advised to take advantage of the relatively attractive bills along the curve while also remaining alert for commercial paper offerings that might be announced.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

10-Sep-20

38

2.60

2.61

29-Oct-20

87

3.50

3.53

14-Jan-21

164

4.28

4.36

11-Feb-21

192

4.50

4.61

13-May-21

283

4.70

4.88

Rates are valid till 01:45pm today (03-Aug-2020)

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

 

FGN Bonds Update: Bullish Trend Sustained as Average Yield in Secondary Market Declines 20bps WoW

As anticipated, the FGN bonds secondary market sustained its bullish trend last week, with demand trickling in from the quantum of unfilled bids at the primary bond auction. Strong buying sentiments also were observed on the back of relatively high system liquidity as well as bond coupon inflows.  Accordingly, average yield across all tenors shed 20bps W-o-W to close at 7.1% on Wednesday.

 

Most of the demand was noticed at the top and mid sections of the curve. Notably, the Mar-27, Feb-28, and the Mar-24 bonds were the most sought after; shedding 125bps, 69bps and 66bps respectively W-o-W.


Going into the week, we expect sustained, albeit reduced buying interest due to expected lower levels of financial system liquidity. We however sustain our recommendation that investors cherry pick bonds with attractive yields across the curve.

 

Please see indicative secondary market bond rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

2.00

16.39

120.89

Apr-23

3

2.95

12.75

125.53

Mar-24

4

2.95

14.20

138.26

Mar-25

5

3.60

13.53

142.04

Jan-26

6

4.50

12.50

138.39

Mar-27

7

5.85

16.29

156.59

Feb-28

8

6.15

13.98

146.75

Apr-29

9

6.60

14.55

152.09

Jul-34

14

7.75

12.15

137.11

Mar-36

16

7.95

12.40

139.39

Apr-37

17

8.25

16.25

171.81

Apr-49

29

8.80

14.80

162.40

Rates are valid till 01:45pm today (03-Aug-2020)

*Please note that the minimum subscription for Bonds is N20,000,000.00

 

Proshare Nigeria Pvt. Ltd.


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