NT-Bills Secondary Market Sustains Bearish Run as Average Yield Expands 45bps to 1.5% WoW

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Monday, February 15, 2021 / 6:12 PM / by Afrinvest Research / Header Image Credit: iStock


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Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market sustained its bearish run as investors traded cautiously ahead of the Primary Market Auction ("PMA") that held on Wednesday.


Consequently, average yields expanded by 45bps W-o-W to 1.5% from 1.0% the previous week.

Average yields on the medium and long-dated maturities recorded the most sell-offs, advancing 76bps and 55bps W-o-W respectively while the short-term instruments witnessed the least sell-offs, inching 8bps W-o-W higher.

At the PMA, the Apex bank rolled over maturing bills worth of N130.8bn (N39.0bn lower than its initial N169.8bn offer) across the 91- (N24.6bn), 182- (N16.1bn) and 364-Day (N90.1bn) tenors. As expected, stop rates advanced at least 2.0x across all tenors compared to the previous auction.
 

Auction Date

10-Feb-21

10-Feb-21

10-Feb-21

Allotment / Issue Date

11-Feb-21

11-Feb-21

11-Feb-21

Tenor

91-Day

182-Day

364-Day

Offer Amount (bn N)

19,783,588,000

10,000,000,000

140,000,000,000

Total Subscription (bn N)

30,618,164,000

21,891,294,000

146,189,805,000

Allotment (bn N)

24,670,420,000

16,056,994,000

90,148,205,000

Range of Bid Rates (%):

0.5000 - 7.9000

1.0000 - 10.0000

1.1200 - 12.0000

Previous Stop rates (%)

0.5

1.0

1.5

Stop Rates (%):

1.0

2.0

4.0

Bid to cover ratio

1.5x

2.2x

1.0x

Allotment ratio

0.8x

0.7x

0.6x

 
The Central Bank of Nigeria ("CBN") also conducted an Open Market Operations ("OMO") auction on Thursday where a total of N170.0bn was offered and sold across the 96-, 187- and 362-Day instruments.

The offer of N170.0bn was met with significant demand with a total subscription of N315.3bn which translated to a 1.9x bid-to-cover ratio.

This week, we expect OMO maturities of N260.2bn and given the system liquidity which was at N208.4bn on Friday, Yields are likely to continue to trend higher to better reflect the expansion at the primary market. Thus, we advise investor’s position on the relatively attractive maturities in the secondary market while market players with a longer horizon can take advantage of the improved yields in the bonds space.

Please see T-Bills rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

10-Jun-21

115

                  1.30

                     1.31

15-Jul-21

150

                  1.65

                     1.66

26-Aug-21

192

                  2.00

                     2.02

28-Oct-21

255

                  2.40

                     2.44

25-Nov-21

283

                  2.64

                     2.70

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


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FGN Bonds Update: Bearish Sentiments as Average Yield increases by 108bps W-o-W to 9.0%; FGN Bonds PMA to Hold on Wednesday
 

Similarly, the FGN Bonds secondary market was bearish despite buoyant liquidity levels which was at N481.6bn on Wednesday 10th February 2021. As a result, average yield across the curve expanded by 108bps W-o-W to settle at 9.0% from 8.0% the previous week.

Particularly, average yields on the short-, medium- and long-term instruments expanded by 114bps, 173bp and 47bps W-o-W respectively. The top three instruments that expanded were 26-Apr-29, 22-May-29 and 28-Nov-28 with 1.89%, 1.82% and 1.80% respectively.

This week, the DMO is slated to conduct a PMA on Wednesday, offering a total of N150.0bn across three re-opening bonds.

Please see more details in the table below:

Bond

16.29% MAR 2027

12.50% MAR 2035

 
9.80% JULY 2045

10-Yr Re-opening

15-Yr Re-opening

 
25-Yr Re-opening

Term to  Maturity

 
6Years

14Years

 
24 Years

Offer Amount (bn N)

50,000,000,000

50,000,000,000

 
50,000,000,000

Previous Stop Rates (%)

8.0

8.7

 
9.0


We expect the week to resume on a quiet note at the secondary market, as investors stay on the side lines in anticipation of Wednesday's PMA and anticipate activity level to pick up with market players attempting to fill unmet bids from the auction. Therefore, we maintain our advice that investors scout for attractive opportunities across the yield curve.

Please see below FGN Bonds secondary market rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

6.15

12.75

113.34

Mar-24

3

6.30

14.20

121.78

Mar-25

4

7.30

13.53

121.73

Jan-26

5

8.75

12.50

114.76

Mar-27

6

9.50

16.29

130.81

Feb-28

7

9.35

13.98

123.44

Jul-34

13

9.85

12.15

116.90

Mar-36

15

9.80

12.40

120.25

Apr-37

16

9.75

16.25

152.32

Apr-49

28

10.05

14.80

144.24

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

Placement:

Fund Range

30 Day Rate (% Gross)

60 Day Rate (% Gross)

90 Day Rate (% Gross)

5M-9.9M

2.00

2.20

2.40

10M-19.9M

2.20

2.30

2.50

20M-49.9M

2.30

2.40

2.60

50M and Above

3.20

3.40

3.60

**Rates are valid till Friday, 19th February


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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