NT-Bills Secondary Market Sustains a Bullish Run as Average Yield Declines 3bps WoW to 0.5%

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Last week, the Nigerian Treasury Bills (NT-Bills”) market sustained its slightly bullish run as yields marginally contracted by -3bp W-o-W to 0.5% as a result of system liquidity which was N586.2bn (positive) on Wednesday.

 

In more details, average yields on the short, medium and long term declined all with of 2bps, 3bps and 12bps W-o-W respectively. Particularly the longer-end of the curve experienced the most contractions in yields especially the 26-Aug-21 (-18bps), 29-Jul-21 (-17bps) and 16-Sep-21(-15bps) bills.

 

The Apex bank is scheduled to rollover maturing bills worth N187.2bn at the Primary Market Auction (“PMA”) to hold on Thursday 28-Jan-21 across the 91-Day (N7.5bn), 182-Day (N54.5bn) and 364-Day (N125.2bn) tenors.

 

Please see below details of the upcoming PMA:

TENOR 91- DAY 182 – DAY 364 – DAY 
Offer Amount 7,500,000,000 54,592,585,000 125,203,918,000
Last Stop Rate 0.5000 1.0000 1.5000
Expected Stop Rate Range (%) 0.400 – 1.9900 0.3800 – 2.7550 0.8000 – 7.0000

 

This week, we expect OMO and NT-Bills maturities worth N190.2bn and N187.2bn respectively to bolster system liquidity which stood at N575.9bn (positive) on Friday. Thus,

 

We anticipate a sustenance of the bullish sentiments in the secondary market as investors Unmet bids may filter from the PMA. Thus, our advice to investors remains that they seek alternative investments such as bonds and Commercial papers given the low yield environment.

 

Please see indicative secondary market NT-Bills rates below:

Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
13-May-21 108 1.20 1.20
10-Jun-21 136 1.45 1.46
26-Aug-21 213 2.05 2.07
28-Oct-21 276 2.44 2.49
25-Nov-21 304 2.66 2.72

Rates are valid till 01:45pm today (25-Jan-2021)

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

 

FGN Bonds Update: Bearish sentiments as Average Yield Expands by 36bps W-o-W to 7.09%; FGN Bond PMA Held on Wednesday

The FGN Bond secondary market had a bearish run last week as market players took advantage of the first monthly auction for the year that held on Wednesday. Consequently, average yield across the curve expanded by 36bps W-o-W to settle at 7.09% from 6.73% the previous week.

 

Across tenors, yields on the medium and long term instruments advanced by 42bps and 62bps W-o-W respectively while the short tenor declined by 5bps. The medium and long tenors had the most buying interests with 18-Jul-34 (80bps) and 26-Apr-29 (74bps)

 

At the first FGN Bond PMA issuance for the year, the 10-year and 15-year reopened instruments were oversubscribed by 83.68% (N50.0bn offered vs. N91.8bn subscribed) and 112.74% (N50.0bn subscribed vs. N106.4bn subscribed) respectively while the 25-year re-opened instrument was under subscribed by 19.86%. In addition, Debt management Office (“DMO”) raised N122.36bn which is 81.57% of the amount offered.

 

Auction Date 20-Jan-20 20-Jan-20 20-Jan-20
Allotment / Issue Date 22-Jan-20 22-Jan-20 22-Jan-20
Term to maturity 6 Years, 2 Months 14 Years, 2 Months 24 Years, 6 Months
Offer Amount (N) 50,000,000,000.00 50,000,000,000.00 50,000,000,000.00
Total Subscription (N) 91,835,303,000.00 106,372,276,000.00 40,066,243,000.00
Allotment (N) 49,401,500,000.00 57,927,850,000.00 15,028,000,000.00
Range of Bid Rates (%) 5.7000% – 16.0000% 7.5000% – 15.0000% 4.4000% – 12.5000%
Stop rates (%) 7.9800 8.7400 8.9500
Previous stop rates (%) 6.9500 7.0000
Bid-to-Cover Ratio 1.8x 2.1x 0.8x
Allotment Ratio 0.5x 0.5x 0.4x

 

Going into the week, we expect that the FGN bonds secondary market may continue to trade in its current bearish posture as investors focus on the improved yields in the primary market. However, we do not rule out the possibility of an increased buying appetite from investors due to the buoyant system liquidity. Thus, we advise investors to take advantage of the relatively improved yields along the curve.

 

Please see indicative secondary market bond rates below:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Jan-22 1              1.10              16.39                    115.19
Apr-23 2              3.80              12.75                    119.14
Mar-24 3              4.35              14.20                    128.57
Mar-25 4              4.50              13.53                    133.90
Jan-26 5              5.90              12.50                    128.18
Mar-27 6              7.15              16.29                    144.77
Feb-28 7              7.25              13.98                    136.73
Jul-34 13              8.20              12.15                    131.86
Mar-36 15              8.25              12.40                    135.49
Apr-37 16              8.30              16.25                    170.15
Apr-49 28              8.25              14.80                    171.27

Rates are valid till 01:45pm today (25-Jan-2020)

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