T-Bills, Bonds Steady over Soft Demand, Declining Spot Rates
The average yield on Treasury bills, Federal Government of Nigeria (FGN) Bonds remained steady on Thursday as the Debt Management Office (DMO) primary market auction sees soft demand.
Yesterday, the Central Bank of Nigeria (CBN) conducted a primary market auction, selling Treasury Bills worth ₦5.86 billion across the 91-day (₦0.96 billion), 182-day (₦1.10 billion), and 364-day (₦3.80 billion) tenors.
Unlike the previous auction, the stop rate for the 182-day tenor remained unchanged at 3.45 percent. However, the stop rates for the 91-day and 364-day tenors settled lower at 2.49 percent (-1 basis point) and 5.00 percent (-34 bps), respectively.
Based on the CBN Auction result shows the Nigerian Treasury bills auction was oversubscribed by 1050 percent, with bid-to-cover ratios settling at 1.82x (91-day), 2.14x (182-day), and 16.66x (364-day).
Recall, at the previous auction, spot rates on 182-day and 364-day T-Bills were down while 91-day was steady at 2.50 per cent.
A better subscription level seen in the Treasury Bills auction was driven in part by healthy financial system liquidity – funds seeking high yielding investments is large, according to some analysts.
Robust financial system liquidity also impacted the short term rates in the money market on Thursday, interbank rate slowdown due to significant drop in open buy back and overnight lending rates.
Data from the FMDQ Exchange shows that the overnight (O/N) rate decreased by 300 basis points to close at 10.50 percent as against the last close of 13.50 percent.
Similarly, and the Open Repo rate also decreased by the same size, dropping off 300 basis points to close at 10.00 percent compared to 13.00 percent on the previous day.
In the secondary market, trading activities on T-Bills closed on a flat note with average yield across the curve remaining unchanged at 4.48 percent, according to Alpha Morgan Capital note.
Market data shows that average yields across short-term, medium-term, and long-term maturities closed flat at 3.39 percent, 3.98 percent, and 5.31 percent, respectively.
In the OMO bills market, FSDH Capital note shows that the average yield across the curve closed flat at 5.45 percent.
Average yields across short-term, medium-term, and long-term maturities remained unchanged at 5.43 percent, 5.51 percent, and 5.53 percent, respectively, according to analysts note.
Also, trading activities in the secondary market for FGN Bonds closed on a flat note as the average bond yield across the curve closed flat at 8.11 percent.
FSDH Capital analysts note shows that average yields across short tenor and medium tenor of the curve remained unchanged. However, the average yield across the long tenor of the curve declined by 1 basis point.
Analysts said FGN Bond Auction for December 2021 was mildly oversubscribed by 33 percent due to relatively lower investor demand, with bid-to-cover ratios for 10-year and 20-year bonds settling at 0.52x and 2.14x, respectively.
The DMO allotted bonds worth ₦98.79 billion through competitive bids across the 10-year (₦14.18 billion) and 20-year (₦84.61 billion) tenors at marginal rates of 11.65 percent and 13.10 percent (+15 bps), respectively.
Additionally, the DMO allotted bonds worth ₦1.20 billion through non-competitive bids across the 10-year tenor. In total, the DMO raised ₦99.99 billion.
Today, FGN Roads Sukuk Company 1 Plc has started offering a 10-Year Ijarah Sukuk bond due in December 2031. The Sukuk bonds worth ₦250 billion are offered at the rental rate of 12.80 percent per annum.
The offer will close on December 22, with a settlement on December 24. The rental payment is payable half-yearly, with a redemption bullet repayment on the date of maturity. # T-Bills, Bonds Steady over Soft Demand, Declining Spot Rates
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