NT-Bills Update: MPC Held Rates Constant; Average Yield Advanced 53bps WoW to Settle at 5.44%

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Monday, September 20, 2021 / 03:38 PM / by Afrinvest Research / Header Image Credit: iStock

 

The Nigerian Treasury Bills ("NT-Bills") secondary market turned bearish last week as market participants focused on the Primary Market Auction ("PMA") which took place on Wednesday (15-Sep-21). Consequently, the average yield in the market advanced 53bps W-o-W to close at 5.44% (from 4.91% the preceding week).

 

In more detail, the average yield across short-, medium-, and long-end of the curve advanced 67bps, 55bps, and 45bps W-o-W respectively as the most sell-offs were witnessed on the 11-Aug-22 (+83bps), 25-Aug-22 (+77bps), and 30-Sep-21 (+70bps) in that order.


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At the PMA last week, we saw higher than expected demand particularly on the 364-Day bill (which recorded a subscription ratio of 16.6x) as a total of N21.88bn was offered by the Central Bank to meet a total subscription of N244.57bn. In addition, the stop rate across all instruments at the auction remained the same as the previous auction.

 

Please see the details of the auction below:

Auction Date

15-Sep-21

15-Sep-21

15-Sep-21

Allotment Date

16-Sep-21

16-Sep-21

16-Sep-21

Maturity Date

16-Sep-21

17-Mar-22

15-Sep-22

Tenor

91-Day

182-Day

364-Day

Offer (₦)

1,605,535,000

5,913,188,000

14,361,351,000

Subscription (₦)

1,884,610,000

4,417,671,000

238,265,157,000

Allotment (₦)

960,660,000

3,611,671,000

151,307,743,000

Range of Bids (%):

2.49000 - 5.2500

3.4900 - 6.7500

6.3000 - 10.0000

Stop Rates (%):

2.5

3.5

7.2

Previous stop rate (%):

2.5

3.5

7.2

Bid-to-Cover Ratio

2.0x

1.2x

1.6x

Subscription Ratio

1.2x

0.7x

16.6x

 

Also, the Monetary Policy Committee ("MPC") held their fifth meeting this year on the last two days of the week (16th and 17th of September 2021) and retained the Monetary Policy Rate ("MPR") at 11.50%. The Apex Bank also held all other policy parameters constant as this is believed to continue supporting growth recovery and economic stability.

 

This week, we expect a turnaround in the bearish tune of the market as the system liquidity improved (₦267.2bn long as at Friday 17-Sep-21). Thus, we advise investors to take advantage of the yields that have appreciated across the market.

 

Please see NT-Bills indicative rates below:

Maturity

Tenor (Days)

Rate (%) p.a.

Yield (%) p.a.

25-Nov-21

66

3.05

3.07

13-Jan-22

115

3.55

3.59

10-Feb-22

143

3.85

3.91

31-Mar-22

192

4.80

4.92

28-Apr-22

220

5.15

5.31

26-May-22

248

6.1

6.36

30-Jun-22

283

6.84

7.22

Rates are valid till 01:45 pm today [20-Sep-21]

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


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FGN Bonds Update: Headline Inflation Moderated 37bps Y-o-Y; Average Yield Advanced 22bps W-o-W to 11.31%

At the Federal Government of Nigeria ("FGN") Bonds secondary market last week, the bearish sentiment was sustained as average yield advanced 22bps to settle at 11.31% from 11.09% the previous week.


Specifically, the average yields of mid-and-long-termed FGN bonds expanded 43bps and 25bps W-o-W to close as 11.76% and 12.73% respectively while that of short-tenured bonds gained 13bps W-o-W.

 

By midweek, the National Bureau of Statistics ("NBS") released the CPI and Inflation report for August. The headline inflation dropped 37bps Y-o-Y to 17.01% from 17.38% recorded in July. This represents the fifth consecutive month of decline after it peaked in March at 18.17%.

 

This week, the Debt Management Office ("DMO") is slated to conduct a PMA on Wednesday 22-Sep-21 as it re-opens the FEB 2028, MAR 2036, and MAR 2050 instruments.

 

Please see details of the bonds auction below:

Bond Name

13.98% FGN FEB 2028 (Re-opening)

12.40% FGN MAR 2036 (Re-opening)

12.98% FGN MAR 2050 (Re-opening)

Auction Date

22-Sep-21

22-Sep-21

22-Sep-21

Settlement Date

23-Sep-21

23-Sep-21

23-Sep-21

Original Tenors

10-Years

20-Years

30-Years

Amount Offered (N'bn)

50.00

50.00

50.00

Previous Marginal Rates (%)

11.60

12.75

12.80

  

Furthermore, we believe the tone of the week will be determined by the outcome of the auction as investors adjust their portfolios with increasing yields in the market. In that light, we advise investors to position in yields that have advanced across all tenors in the market particularly the mid-end of the curve. Also, investors can take advantage of the MTN Nigeria Communications Plc Series 2 Bond issuance of about N89.99bn.

 

Please see below FGN Bonds secondary market indicative rates:

Bond

Tenor (Years)

Yield (%)

Coupon (%)

Implied Price (N)

Apr-23

2

             8.10

            12.75

                  106.83

Mar-24

3

             8.20

            14.20

                  113.23

Mar-25

4

             9.55

            13.53

                  111.62

Jan-26

5

             9.70

            12.50

                  109.69

Mar-27

6

           10.60

            16.29

                  123.23

Feb-28

7

           10.60

            13.98

                  115.44

Jul-34

13

           11.70

            12.15

                  102.91

Mar-36

15

           11.85

            12.40

                  103.76

Apr-37

16

           11.50

            16.25

                  134.04

Apr-49

28

           11.80

            14.80

                  124.32

Rates are valid till 01:45 pm today [20-Sep-21]
*Please note that the minimum subscription for FGN Bonds is N20,000,000.00


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