Bearish Momentum Halted as Average NT-Bills Yield Dips to 3.8% W-o-W

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Monday, February 17, 2020 01:49 PM / By Afrinvest Research / Header Image Credit: ilearnlot

 

Last week, activities in the Nigerian Treasury Bills ("NT-Bills") secondary market ended on a bullish note, as system liquidity remained buoyant due to combined inflows of N1.2tn from Bonds, OMO and NT-Bills maturities. Thus, average yield shed 6bps to settle at 3.8% W-o-W. Sell-offs were witnessed on the short dated bills as yields lost 22 bps W-o-W while the medium and long term bills gained 25bps and 14bps respectively, following major buying interests seen on the 26-Nov-20(-74bps), 12-Nov-20(-37bps) and 30-Jul-20(-31bps) bills.

 

In last week's Primary Market Auction ("PMA"), the Apex bank offered bills worth N154.4bn across 91-, 182- and 364-Days which was met by an oversubscription across all tenors. Offers were fully matched with sales, thus respective stop rates closed at 3.00%, 4.00% and 6.54%.

 

Please see more details in the table below:

Auction Date

12-Feb-20

12-Feb-20

12-Feb-20

Allotment / Issue Date

13-Feb-20

13-Feb-20

13-Feb-20

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

4,384,180,000

10,000,000,000

140,000,000,000

Total Subscription (N)

29,826,783,000

52,498,035,000

205,479,531,000

Allotment (N)

4,384,180,000

10,000,000,000

140,000,000,000

Range of Bid Rates (%)

2.2500 - 5.9116

2.8000 - 9.5000

5.4000 - 13.1800

Stop Rates (%)

3.00

4.00

6.54

Previous Stop Rates (%)

3.50

4.50

6.50

Bid-to-Cover Ratio

6.8x

5.2x

1.5x

Allotment Ratio

0.1x

0.2x

0.7x

 

The CBN also held its Open Market Operations ("OMO") auctions last week to manage the system liquidity. However, there was an undersubscription of 0.9x, following N214.9bn subscription against N250.0bn put on offer.

 

This week, we expect system liquidity to remain buoyant (N784.2bn positive as at Friday) following expected OMO maturities worth N627.2bn. Consequently, we anticipate that the CBN will continue its liquidity mop-ups via OMO auctions.

 

We expect yields in the NT-Bills space to sustain a bullish stance given the high liquidity level in the system and limited asset class available to investors to reinvest matured funds. Therefore, we advise investors to take advantage of NT-Bills with relatively attractive yields.

 

FGN Bonds Market Update: Yield Hunting Puts the Bulls on the Centre Stage as Average Yield Declines 7bps W-o-W

Similarly, the performance in the domestic bonds market reflected activities in the NT-Bills space, as investors continue to hunt for higher yields given the relatively low yield environment in the money market.

 

The CRR debits and OMO auctions witnessed in the early part of the week were unable to offset the impact of inflow from maturities. Thus, the market closed on a bullish note as average yield lost 7 bps to settle at 10.2% W-o-W.

 

The 15-JUL-21 (-49bps) and 18-APR-37 (-31bps) enjoyed the most buying interest while the 27-JAN-22 (+67 bps) suffered the most sell-off.

 

This Wednesday, the Debt Management Office ("DMO") is scheduled to re-open instruments worth N140.0bn across the 5-Year (N45.0bn), 10-Year (N45.0bn) and 30-Year (N50.0bn) tenors via PMA

Bonds

12.75% FGN APR 2023

14.55% FGN APR 2029

14.80% FGN APR 2049

(5-Yr Re-opening)

(10-Yr Re-opening)

(30-Yr Re-opening)

Term-To-Maturity

3 Years, 2 months

9 Years, 2 months

29 Years, 2 months

Offer Amount (N)

45,000,000,000

45,000,000,000

50,000,000,000

Previous Stop Rates

9.85%

11.13%

12.56%

 


This week, we anticipate a quiet trading session at the beginning of the week as investors prepare for the bond PMA. However, we expect a pickup in the level of demand on the back of robust system liquidity and investors’ continuous bargain for high yielding assets to reinvest matured funds.

 

Also, we anticipate Foreign Portfolio Investors ("FPI") driven buying interest on the short dated instruments following the introduction of Futures  contract ranging between 1 to 5 years on the FMDQ. Thus, investors are advised cherry-pick attractive instruments.


Proshare Nigeria Pvt. Ltd.

 

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