Average NT-Bills Yields Expand 110bps WoW to 2.7% Amidst Sell-offs Following Tight Funding Levels

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Monday, March 15, 2021 / 01:28 PM / by Afrinvest Research / Header Image Credit: Getty


Proshare Nigeria Pvt. Ltd.


In the past week, activity levels in the Nigerian Treasury Bills ("NT-Bills") secondary market remained mostly minimal, as investors focused on the Primary Market Auction ("PMA") that held on Wednesday. However, on Thursday, significant sell-offs were witnessed on some mid-dated maturities in reaction to higher yields at the PMA.


Particularly, investors exited positions in the 15-Jul-21, 29-Jul-21, 26-Aug-21 instruments the most, as they expanded 208bps, 195bps, and 169bps respectively on the day. Consequently, average yields across the NT-Bills curve trended 110bps northwards W-o-W to 2.7% from 1.6% the previous week
.

 

On Wednesday at the PMA, the Central Bank offered a total of N88.9bn across the 91-, 182- and 364-Day tenors and was met with a stronger demand than its previous auction, recording a total bid-to-cover ratio of 2.2x (total subscription of N196.9bn). In addition, local investors continued to seek higher yields, bidding up to 10.5% on the long offer, while the Debt Management Office ("DMO") allotted N19.9bn higher than its original offer.

Please see detailed PMA results below:

Auction Date

10-Mar-21

10-Mar-21

10-Mar-21

Allotment / Issue Date

11-Mar-21

11-Mar-21

11-Mar-21

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer (N)

4,405,140,000

14,002,523,000

70,501,216,000

Subscription (N)

18,385,805,000

53,025,041,000

125,443,597,000

Allotment (N)

4,744,287,000

23,454,545,000

80,570,597,000

Range of Bid Rates (%):

1.7500-8.0000

3.0000-9.5000

4.5000-10.5000

Stop Rates (%):

2.00

3.50

6.50

Previous Stop Rates (%):

2.00

3.50

5.50

subscription ratio:

4.17x

3.79x

1.78x

Allotment Ratio

0.26x

0.44x

0.64x


This week, we expect that the N40.1bn and N143.4bn worth of maturing NT-Bills and OMO bills respectively scheduled to hit the system will ease tight funding levels (N34.2bn in the Negative as of Friday). Therefore, we envisage an improvement in activity levels at the NT-Bills secondary market and expect some pressure on yields going into the week. Thus, we advise investors to take advantage of higher-yielding maturities along the curve while also looking out for more attractive corporate offerings.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

1-Jul-21

108

1.45

1.46

9-Sep-21

178

3.03

3.08

28-Oct-21

227

4.45

4.58

25-Nov-21

255

4.70

4.86

10-Feb-22

332

5.16

5.41

*Please note that the minimum subscription for NT-Bills is N100,000.00
Rates are valid till 01:45pm today (15-Mar-21)


Proshare Nigeria Pvt. Ltd.


Commercial Papers


Please see below our available commercial papers:

NAME

MINIMUM SUBSCRIPTION

TENOR

DISCOUNT RATE

YIELD

OFFER CLOSING DATE

MTN Nigeria Communications Plc (Series 3 & 4)

N1.0 million

180-Day

  4.65% - 4.85%

  4.76% - 4.97%

17-Mar-21

270-Day

5.55% - 5.75%

5.73% - 6.01%

Fidson Healthcare Plc (Series 1)

N5.0 million

270-Day

6.50%

6.83%

18-Mar-21

The offers close 09:00am on the closing dates


FGN Bonds Update: Bullish Performance as Average Yields Shed 10bps W-o-W to Settle at 9.3%

As envisaged, the FGN Bonds secondary market performance was bullish on almost all trading sessions last week, as investors continued to take position in maturities across short- to mid-end of the curve despite tight liquidity levels. However, by Thursday, there were mild sell-offs witnessed along the short-term instruments, particularly on the JAN-22 instrument, as investors freed up positions amidst the pressured liquidity. As a result, average FGN Bonds secondary market yields contracted 10bps W-o-W to 9.3% from 9.4% the previous week.


In more detail, the JAN-26 and MAR-25 instruments enjoyed the most demand from investors, contracting 130bps and 96bps W-o-W respectively.

This week, we expect that activity levels will remain stable in the secondary market as investors gradually position in relatively attractive maturities in light of improved yields. Thus, we maintain our advice that investors take advantage of relatively attractive yields at the shorter end of the curve.

Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

5.40

12.75

114.52

Mar-24

3

5.55

14.20

123.58

Mar-25

4

5.65

13.53

128.02

Jan-26

5

8.80

12.50

114.35

Mar-27

6

9.10

16.29

132.72

Feb-28

7

9.15

13.98

124.41

Jul-34

13

10.25

12.15

113.62

Mar-36

15

10.32

12.40

115.70

Apr-37

16

10.35

16.25

145.74

Apr-49

28

10.35

14.80

140.44

Rates are valid till 01:45pm today (15-Mar-21)
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


Proshare Nigeria Pvt. Ltd.


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