Monday, October 26, 2020 / 3:04 PM / Afrinvest Research / Header Image Credit: CPD First
Last week, the Nigerian Treasury Bills ("NT-Bills") secondary market witnessed another bullish performance for a third consecutive week, driven by sustained buoyant liquidity levels which stood at N771.8bn in the positive as at Monday. As a result, average yield across all tenors declined 72bps W-o-W to close at 0.4% from 1.1% the previous week.
In more detail, significant demand was witnessed at the longer-end of the curve, as its average yield fell 112bps W-o-W to 0.5% from 1.6% the previous week. Particularly, the 16-Sep-21, 09-Sep-21 and 26-Aug-21 bills enjoyed the most buying interest, contracting 122bps, 121bps and 120bps W-o-W respectively.
On Thursday, the Apex Bank conducted an Open Market Operation ("OMO") auction where a total of
N100.0bn was offered across the 138-, 180- and 362-day tenors. The Central Bank allotted its total offer across all tenors, despite the strong demand from investors with a bid-to-cover ratio of 3.1x (N314.4bn subscribed). In addition, stop rates were tightened across the short-, medium- and long-term offers to 3.7%, 6.8%, and 8.0% respectively.
This week, the Central Bank of Nigeria ("CBN") is slated to conduct NT-Bills Primary Market Auction ("PMA") on Wednesday, where a total of N134.8bn (
N19.6bn lower than the expected maturity of N154.4bn) worth of NT-Bills will be rolled over across the 91-, 182- and 364-day tenors.
Please see below our PMA expectations:
182 - Day
364 - Day
Offer Amount (N)
Previous Stop Rate
Expected Stop Rate Range
1.0000% - 1.1000%
1.0000% - 1.2000%
1.900% - 2.1000%
Thus, we expect reduced buying sentiment today as investors may trade cautiously in anticipation of the Wednesday's PMA. Nevertheless, we expect activities to pick up towards the end of the week as investors may seek to place their lost primary market bids into the NT-Bills secondary market.
Furthermore, we expect yields in the secondary market to remain pressured due to the high liquidity levels (
N1.3tn long as at Friday) along with the expected NT-Bills maturity worth N154.4bn scheduled to hit the system on Thursday. Therefore, we advise investors to take position in maturities with the least contracting yields as well as possible commercial paper offerings.
Please see indicative secondary market T-Bills rates below:
Rate (%) p.a.
Yield (%) p.a.
Rates are valid till 01:45pm today (26-Oct-20)
*Please note that the minimum subscription for T-Bills is N100,000.00
FGN Bond Update: Bullish Performance as Average Yield Contracts 76bps W-o-W to 4.2%
Last week, the FGN Bond secondary market furthered its bullish performance into another week, on the back of high liquidity levels. Consequently, average yields on all instruments dipped 76bps W-o-W to 4.2% from 5.0% the previous week as the Mar-27 and Apr-37 maturities witnessed the most buying interest, contracting 142bps and 127bps respectively.
On Wednesday, the Debt Management Office ("DMO") offered a total of N30.0bn across the 15-year and 25-year re-opening instruments. The offer was met with a very strong demand recording a total bid-to-cover ratio of 7.9x (N30.0bn offered vs. N235.9bn subscribed).
Please see below a detailed summary of the auction:
12.50% FGN MAR 2035
9.80% FGN JUL 2045
14 Years, 5 Months
24 Years, 9 Months
Range of Bids:
4.0000% - 12.0000%
4.5000% - 12.5000%
Previous Stop Rates:
Bid to Cover Ratio:
This week, we expect a bullish performance in the bonds secondary market due to liquidity driven activity along with investors seeking to fill their lost bids from the PMA and therefore advice investors to take position on the relatively more attractive maturities along the curve while looking out for possible corporate offerings.
Please see indicative secondary market bond rates below:
Implied Price (N)
Rates are valid till 01:45pm today (26-Oct-2020)
*Please note that the minimum subscription for Bonds is N20,000,000.00
More FGN Pro-note Issues to Come
Withdraws Green Bond Assessments
Breweries Plc Series 9 and 10 Commercial Paper Now Open
Clear Winner from Crashed Bond Yields
of FGN Bond Auction Results for October 2020
Cuts OMO Rates by 37bps Staying True to Their Stance
MB Funding SPV Plc's Up to N10bn Series I Bond Issuance Now Open
8. Land-sliding Drop-in Bond Auction Stop Rate as DMO
Cuts Rates by Approximately 200bps
Appetite for Bonds Continues to Weight Yields Down
Secondary Market Sustains Bullish Run as Average Yield Moderates to 1.1%WoW