Weekly Update on NT-Bills [25.01% down 22bps] and FGN Bond [20.72% up 65bps]

Weekly Update on NT-Bills [25.01% down 22bps] and FGN Bond [20.72% up 65bps]
(Source: Afrinvest Securities Limited, Date: 27-Jan-2025)

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Bulls Prevails, as Average Yield Declines 22bps W-o-W to 25.01%

The Nigerian Treasury Bills (NTB) secondary market experienced bullish sentiment last week, as heightened system liquidity and investor positioning shaped trading activity. As a result, the average benchmark yield declined by 22bps w-o-w to close at 25.01%.

In detail, bullish sentiment dominated all the maturities, with the short -, mid- and long end shedding 11bps, 12bps and 37bps w-o-w respectively. Post-auction trading saw demand pick up for the new 1-year paper, as it traded as low as 20.85%, marking a 9bps decline from the stop rate.

At the NTB auction held on 22-Jan-25, the DMO (Debt Management Office) offered ₦50.00bn, ₦80.00bn, and ₦400.00bn across the 91-day, 182-day, and 364-day tenors, respectively. Demand was particularly strong on the 364-day tenor, reflected in a subscription ratio of 6.23x, while the 91-day and 182-day tenors recorded moderate interest with subscription ratios of 0.53x and 0.22x, respectively. Consequently, the stop rates for the 91-day, 182-day, and 364-day papers settled at 18.00%, 18.50%, and 21.80%, compared to their previous levels of 18.00%, 18.50%, and 22.62%.

Please see a detailed summary of the NT-Bills PMA below:

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This week, we expect market direction to remain guided by liquidity levels and investor appetite for high-yielding instruments in the secondary market. Thus, we advise investors to position in relatively attractive bills across the yield curve, while also remaining alert for possible corporate offerings.

Please see indicative secondary market NT-Bills rates below:

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Rates are valid till 01:45pm today (27-Jan-25)

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

FGN Bond Market: Average Yield Increases By 65bps W-o-W to 20.72%

The domestic FGN Bonds secondary market opened last week on a subdued note, as cautious sentiment prevailed across most maturities. Market performance was further influenced by the anticipation of the December FGN Bonds Primary Market Auction (PMA) scheduled for this week. Consequently, the average benchmark yield rose by 65bps W-o-W to settle at 20.72%.

In detail, bearish sentiment dominated all the maturities, with the short -, mid- and long ends rising 73bps, 45bps and 86bps w-o-w respectively. The Mar-2035 saw the most uptick, moving 189bps to settle at 20.15% w-o-w.

Today, Monday, 27-Jan-25, the PMA is expected to draw significant attention as the DMO plans to re-open the 19.30% APR-2029 and 18.50% FEB-2031 instruments, along with the issuance of the new JAN-2035 bond. The APR-2029 and FEB-2031 instruments have tenors of 4 years, 3 months, and 6 years, 1 month, respectively, while the JAN-2035 bond has a tenor of 10 years. The DMO is offering ₦150bn-₦200bn for each of the instruments, with their original tenors being 5 years, 7 years, and 10 years, respectively.

Please see below our PMA expectations:

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This week, we also expect the outcome of the PMA to set the tone for the market. We therefore advice investors to take advantage of maturities with relatively attractive offers in the secondary market particularly at the short end of the curve.

Please see below FGN bond secondary market rates: