Ahead Next T-bills auction: Demand level to remain buoyant — Analysts


By Ayobami Adedinni

As the Federal Government,  is set to auction N117.18billion treasury bills this week, analysts at Meristem Wealth Management Limited, have said demand level will remain buoyant.

According to them, despite the decline in subscription levels over subsequent auctions, demand for the 364-day instrument has remained significant in recent Primary Market Auctions.

They said, “The Central Bank of Nigeria (CBN) is scheduled to hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on the 29thof November 2017.

“T-bills worth N117.18 billion will mature in 91-day, 182-day, and 364-day instruments accordingly, while an equal sum is expected to be issued across the same tenors.

“The CBN is expected to auction N26.14 billon, N11.01 billion and N80.03 billion in the 91-day, 182-day, and 364-day instruments respectively.

“The secondary market for Treasury bills has been characterized by bearish sentiments since the last Primary Market Auction (PMA) on the 15th of November 2017. Sell pressures were witnessed on all instruments save for the 9M instrument which recorded a yield decline of 0.29 per cent.

“The 1M, 3M, 6M and 12M instruments witnessed yield increases of 1.10 per cent, 0.20 per cent, 0.15 per cent and 0.11 per cent respectively. Consequently, the average Treasury bills yield for the period advanced by 0.26 per cent to settle at 17.29 per cent on the 23rd of November 2017.

“Given the dearth of issuances of longer tenor instruments in OMO auctions, demand for the 364-day instrument has remained significant in recent Primary Market Auctions, although we note the decline in subscription levels over subsequent auctions.

“The 364-day instrument was oversubscribed by 1.30x at the last auction, while the bid to cover ratio on the 91-day and 182-day instruments were 1.01x and 1.00x respectively.

“On the 20th of November 2017, the Federal Govern-ment of Nigeria issued Eurobonds worth $3.00 billion, from its Global Medium Term Note Programme of $4.50 billion, split equally between the 10-year (6.500 per cent) and 30-year (7.625 per cent) series.

“The issues were well oversubscribed at the conclusion of the book build, with a total subscription amount of $11.40 billion, indicating an oversubscription of approximately 3.80x.

“The proceeds from the auction are expected to be used to fund approved budgetary expenditures and also refinance domestic debt. We expect this to drive demand at the PMA in the near term, given the expectation of reduced domestic borrowing.

“Moreover, the Monetary Policy Committee’s decision to maintain the MPR at 14% is expected to keep the yield environment attractive. Consequently, we expect demand level to remain buoyant at the next auction.

“The income from investing in T-Bills is tax-free, so interest received is not subject to withholding tax and you will receive an immediate Investment confirmation letter for the Treasury bills. Also, note that the T-Bills certificates can be used as collateral for securing loans,” they said.



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