Bearish Momentum Resumes as Average NT-Bills Yield Advances 8bps WoW to 0.5%

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Monday, January 18, 2021 / 02:15 PM / By Afrinvest Research / Header Image Credit: Clearview

 

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Last week, trading in the Nigerian Treasury Bills ("NT-Bills") secondary market started-off on a quiet note against the backdrop of depressed yields in the market. There were minimal trading activities recorded as weak investor sentiments continued to drag activity in the space. Consequently, average yields expanded across the curve by 8bps W-o-W to 0.5% from 0.4% the previous week.

 

In more detail, the most sell-offs were witnessed at the longer-end of the curve as yields on the 25-Nov-21, 11-Nov-21 and 28-Oct-21 instruments expanded 25bps, 23bps and 20bps W-o-W respectively. Similarly, the medium-term NT-Bills advanced 2bps W-o-W to 0.4% while short-term NT-Bills remained unchanged with minimal interest from investors.

 

On Wednesday, the Central Bank of Nigeria ("CBN") conducted a Primary Market Auction ("PMA") where a total of N232.4bn was offered across the 91- (N12.8bn), 182- (N26.7bn), and 364-Day (N193bn) tenors. The offer maintained a strong level of demand as its total bid-to-cover ratio stood at 1.2x (N286.1bn total subscribed).  All tenors were oversubscribed with investor demand strongest at the 91-Day instrument which was oversubscribed by 1.8x (N12.8bn offered against N23.6bn subscribed). In addition, stop rates on the short, medium, and long-term instruments improved to 0.5%, 1.0% and 1.5% respectively.

 

Please see a detailed summary of the PMA in the table below:

Auction Date

13-Jan-21

13-Jan-21

13-Jan-21

Allotment / Issue Date

14-Jan-21

14-Jan-21

14-Jan-21

Tenor

91-Day

182-Day

364-Day

Offer Amount (N)

12,761,131,000

26,600,000,000

193,000,000,000

Total Subscription (N)

23,572,253,000

30,626,322,000

231,928,722,000

Allotment (N)

15,915,252,000

25,372,322,000

65,931,722,000

Range of Bid Rates (%)

0.0300 - 1.9900

0.3800 - 2.7550

0.8000 - 7.0000

Stop Rates (%)

0.50

1.00

1.50

Previous Stop Rates (%)

0.04

0.50

1.21

Bid-to-Cover Ratio

1.8x

1.2x

1.2x

Allotment Ratio

0.7x

0.8x

0.3x

 

On Thursday, the Apex Bank conducted its customary Open Market Operations ("OMO") auction, offering a total of N80.0bn across the 96-, 180- and 362-Day tenors which received a total subscription of N619.5bn (7.7x total bid-to-cover ratio). All tenors were oversubscribed with the most demand recorded on the 362-Day offer, which had a bid-to-cover ratio of 8.4x. Furthermore, stop rates across the short, medium and long-term instruments remained unchanged at 1.5%, 4.3% and 5.7% respectively.

This week, we expect the lukewarm sentiments from investors to persist given the current subdued yields in the secondary market despite the scheduled boost in liquidity levels (which stood at N242.9bn long as at Friday) from maturing OMO bills worth N226.3bn. Thus, investors are advised to take position in instruments which advanced across the yield curve.

 

Please see indicative secondary market NT-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

29-Apr-21

101

1.30

1.30

13-May-21

115

1.40

1.41

15-Jul-21

178

1.93

1.95

16-Sep-21

241

2.40

2.44

25-Nov-21

311

2.66

2.72

Rates are valid till 01:45pm today (18-Jan-21)


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


 

FGN Bonds Update: Bearish Performance Persists as Average Yield Rises 30bps W-o-W to 6.7%


The bearish performance in the FGN bonds secondary market was sustained last week as investors continued to trade cautiously in anticipation of the Q1:2021 Bond PMA calendar alongside December 2020 inflation data (15.8%) released by the National Bureau of Statistics ("NBS") on Friday.  As a result, average yield across all tenors inched northwards by 30bps W-o-W to settle at 6.7% from 6.4% the previous week.

 

Major selloffs were witnessed on the 23-Feb-28, 17-Mar-27 and 18-Apr-37 maturities with yields rising by 143bps, 141bps and 67bps W-o-W respectively.

 

This week, the Debt Management Office ("DMO") is slated to conduct a PMA on Wednesday, where a total of N150bn will be offered across the MAR 2027, MAR 2035 and JUL 2045 instruments.

 

Please see details of the bonds auction below:

Bonds

16.2884% FGN MAR 2027

12.50% FGN MAR 2035

9.80% FGN JUL 2045

(Re-opening)

(Re-opening)

(Re-opening)

Term-To-Maturity

6 Years, 2 months

14 Years, 2 months

24 Years, 6 months

Offer Amount (N)

50,000,000,000

50,000,000,000

50,000,000,000

Previous Stop Rates

7.8700%

9.3500%

9.7500%

 

Furthermore, we expect a bearish start of the week as investors wait on the side-lines in anticipation of the PMA slated for Wednesday and envisage an improvement in demand levels as the week progresses due to possible unmet bids from the PMA that may filter into the secondary market. Therefore, investors are advised to cherry pick instruments with relatively attractive yields along the curve.

 

Please see below FGN Bonds secondary market rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Jan-22

2

1.10

16.39

115.47

Apr-23

3

2.20

12.75

123.25

Mar-24

4

3.25

14.20

132.57

Mar-25

5

4.30

13.53

134.95

Jan-26

6

5.50

12.50

130.28

Mar-27

7

5.85

16.29

153.34

Feb-28

8

6.30

13.98

143.38

Jul-34

14

7.80

12.15

135.91

Mar-36

16

8.00

12.40

138.23

Apr-37

17

8.00

16.25

174.25

Apr-49

29

8.05

14.80

174.81


Rates are valid till 01:45pm today (18-Jan-21)


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


Proshare Nigeria Pvt. Ltd.


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