Market | Bonds & Fixed Income

Ahead of Next T-Bills Auction Scheduled for 14th December 2022

Dec 13, 2022   •   by   •   Source: Meristem   •   eye-icon 226 views

Offer Summary 

The Central Bank of Nigeria (CBN) will hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on the 14th of December 2022. At the PMA, existing T-Bills totalling NGN13.58bn (NGN8.50bn, NGN1.28bn and NGN3.80bn across the 91- day, 182-day, and 364-day instruments, respectively), will mature and be rolled over. 


Outlook on Yields 

At the last PMA, stop rates on the 91-Day, 182-Day and 364-Day instruments declined by 1bp, 5bps and 145bps to (6.49%, 8.00%, and 13.05%) respectively. The decline in stop rate is attributed to demand glut as subscription-to-offer ratio increased across the trio instruments to 3.39x, 1.47x and 14.05x from (0.37x, 0.07x and 2.47x at the prior auction) respectively. The improvement in subscription-to-offer ratio signals increased investors’ appetite. Hence, total subscription-to-offer ratio increased to 13.40x (vs. 1.69x in the last auction). Also, the bid-to-cover ratio increased to 6.98x relative to 1.69x recorded in the previous auction. 


In the forthcoming auction, we expect a moderation in stop rates on the instruments. This is primarily premised on the low amount offered – NGN13.58bn (vs NGN54.45bn in the prior period) which could prompt oversubscription similar to the last auction. 


The bullish sentiment prevailed in the secondary market, asthe average Treasury bills decreased by 249bps to 9.36% as of December 12, 2022 (vs 11.86% on the date of the previous auction). This is because investors with unmet demands at the previous auction rotated into the secondary market during the period. We expect the same dynamics to continue in the near term as the amount on offer is low (as highlighted above). 


Given the above, our rate guidance is informed by the need to strike a balance between maximizing investment returns and having a successful bid. Thus, the recommended stop rates for the respective instruments are as follows:

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