Investment bankers’ pitch T-Bills; say investors oversubscribed 364-day By Oluwafemi Michael
An increasing numbers of Investment banking firms are pitching Treasury bills to investors using its attractive yield as basis for building the investment case. It was noted that long end tenor bills were investors favourite in the past week as it was oversubscribed by 339%.
According to discussion across Broadstreet, investment advisers’ notes indicate that government securities are largely juicy now, with an average yield of about 13.3% couple with stability and liquidity.
Afrinvest in its weekly recommendation stated that last week, the T-Bills secondary market reversed its two-week bearish run on the back of improved system liquidity -N260.0bn long as at Tuesday- stemming from a federation accounts allocation committee (FAAC) disbursement of N341.0bn which hit the financial system the previous Friday.
In addition, open market operation (OMO) maturities worth N422.0 billion further buoyed system liquidity, spurring buying interests particularly on the medium and longer end of the curve – 26-Mar-20 (-129bps), 02-Apr-19 (-113bps) and 11-Jun-20 (-93bps).
Consequently, average yield across all tenors closed at 13.3% week on week, which represents 34 basis points lower than 13.6% the previous week.
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Afrinvest noted that despite improved system liquidity, the CBN conducted a much anticipated OMO auction once last week, offering a total of N250.0bn on Thursday across the 84 (N20.0bn), 184 (N30.0bn) and 364-day(N200.0bn) tenors.
The short- and medium- term maturities were 98.5% and 93.0% under subscribed respectively as bills with similar tenors commanded high rates in the secondary market.
However, the 364-day bill was 339.0% oversubscribed as N200.0bn was offered while N678.3bn was subscribed as more investors positioned on the longer end of the curve.
As a result, the Apex bank prorated all successful bids by 44.0% allotting a total of N300.0bn to investors.
Consequently, on Friday, the yield on longer-dated T-Bills shed 30bps as investors with unfilled bids from the auction about N378.3bn positioned in these instruments with more demand on the 17-Sep-20 bill.
“Going into the 4-day trading session this week (due to the Independence Day break), the CBN is expected to rollover a total of N134.0bn worth of maturing T-Bills at the Primary Market Auction on Wednesday. We expect to see more investors position at the longer end of the curve”, Afrinvest stated.
In addition to the maturing T-Bills, expected OMO maturity of N472.4 billion on Thursday will further bolster system liquidity.
Afrinvest however advise investors to take advantage of T-bills with attractive yields across all tenors in the primary and secondary markets as well as potential OMO offers.
