NT-Bills Market Sustains Bullish Run as Average Yield Moderates 40bps WoW to 0.1%

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Monday, November 16, 2020 / 01:32 PM / by Afrinvest Research / Header Image Credit: UBA


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Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market maintained its mild bullish run for a consecutive week as demand from investors improved towards the end of the week, following the Primary Market Auction ("PMA") that held on Wednesday. Consequently, average yield declined 40bps to settle at 0.1% from 0.5% the previous week.

 

In more detail, the short and medium dated maturities witnessed the most demand, contracting 93bps and 77bps W-o-W respectively with the 28-Jan-21 (-93bps) and 25-Feb-21 (-86bps) bills enjoying the most buying interests.

 

On Wednesday at the PMA, the Central Bank of Nigeria ("CBN") offered a total of N167.8bn across the 91 day, 182 day and 364 day tenors. The offer received a significant level of demand from investors as it recorded a total bid-to-cover ratio of 3.6x (N167.8bn offer vs. N603.1bn subscription). In addition, stop rates across all tenors declined to 0.04%, 0.15% and 0.30% for 91 days, 182 days and 364 days respectively.

 

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

Auction Date

11-Nov-20

11-Nov-20

11-Nov-20

Allotment / Issue Date

12-Nov-20

12-Nov-20

12-Nov-20

Tenor

(91-Day)

(182-Day)

(364-Day)

Offer (=N=)

19,783,588,000

40,093,992,000

107,938,478,000

Subscription (=N=)

99,855,258,000

92,177,089,000

411,089,728,000

Allotment (=N=)

19,783,588,000

10,000,000,000

138,032,470,000

Range of Bid Rates (%):

0.0350 - 1.0000

0.1500 - 1.0000

0.1500 - 1.9900

Current Stop Rates (%):

0.04

0.15

0.3

Previous Stop rates (%)

0.34

0.5

0.98

Bid to cover ratio

5.1x

2.3x

3.8x

Allotment ratio

0.2x

0.1x

0.3x

 

On Thursday, the Apex bank conducted an Open Market Operation ("OMO") auction where a total of N70.0bn was offered across the 131-day (N10.0bn), 187-day (N10.0bn) and 355-day (N50.0bn) instruments. There was a significant level of demand from investors as it recorded total bid-to-cover ratio of 5.8x (N70bn offer vs. N407.3bn subscription).

 

Although, OMO maturities worth (N103.1bn) is expected to hit the system on Thursday, we do not expect the bullish sentiment to persist as investors seek alternative opportunities given the depressed yields in the NT-Bills secondary market.

 

Please see below NT-Bills rates for this week

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

28-Jan-21

73

1.10

1.10

11-Mar-21

115

1.65

1.66

13-May-21

178

2.08

2.10

15-Jul-21

241

2.55

2.59

16-Sep-21

304

2.91

2.98

Rates are valid till 01:45pm today (16-Nov-2020)

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

 

 

FGN Bonds Update: Bullish Streak Comes to a Halt as Average Yield Advances 19bps W-o-W to 4.1%; FGN Bond PMA Holds this Wednesday

 

The Bond secondary market traded on bearish sentiments last week, as average yield expanded 19bps W-o-W to settle at 4.1% from 3.9% the previous week. April-29 and May-29 recorded the most sell-off, both at 51bps W-o-W respectively.

 

This week, the DMO is stated to conduct a Bond PMA on Wednesday offering a total of N80.0bn across two re-opening bonds.

 

Please see more details in the table below:

BONDS

12.50% FGN MAR 2035

9.80% FGN JUL 2045

15-Yr Re-opening

25-Yr Re-opening

Term to  Maturity

14 Years, 4 Months

24 Years, 8 Months

Offer Amount (bn N)

40,000,000,000

40,000,000,000

 

We expect more buying interest and as outstanding funds from local investors to filter into the FGN bond space due to relatively better yields. Thus, active investors are advised to trade along short-term bonds that advanced last week and long term bonds for investors interested in long term bonds.

 

Please see indicative secondary market bonds rates below:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Mar-25

5

1.40

13.53

151.04

Jan-26

6

2.45

12.50

148.60

Mar-27

7

2.90

16.29

176.97

Feb-28

8

3.20

13.98

169.39

Apr-29

9

3.25

14.55

182.84

Jul-34

14

4.25

12.15

181.25

Mar-36

16

4.25

12.40

191.14

Apr-37

17

4.25

16.25

240.80

Apr-49

29

6.30

14.80

211.80

Rates are valid till 01:45pm today (16-Nov-2020)

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


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