Chimara Bygold
Investors’ expectations are high that Stop Rates will remain unchanged on the 91- and 182- Day instruments, in line with historical trends. This comes as the Central Bank of Nigeria (CBN) is set to roll over N150.82 billion maturing Treasury Bills on November 10, 2021.
A Stop Rate or Stop Price is the price in a stop order which triggers creation of a market order. In the case of a Sell on Stop order, a market sell order is triggered when the market price reaches or falls below the stop price.
However, dealers expect the rate on the 364-day instrument to decline further.This is mainly because of the Government’s preference for the longer-term instrument, despite a 11.74per cent decline in investor subscription for the instrument at the last auction.
Join our WhatsApp ChannelSpecifically, available records show that the CBN will hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on November 10, 2021.At the PMA, Existing T-Bills, totaling NGN150.82billion (NGN4.80bn, NGN7.99bn, and NGN138.03bn across the 91-day, 182- day, and 364-day instruments respectively), will mature and be rolled over.
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Analysts at Meristem Research observed that, at the previous auction, Stop Rates on the 91-day and 182-day instruments were unchanged at 2.50 per cent and 3.50per cent respectively. However, the rate on the 364-day instrument declined to 6.99 per cent from 7.25per cent. According to the analysts, investors’ demand faded, as overall subscription was more than two times (2.87x) amount offered (vs 4.05x at the last auction).
Also, the overall bid to cover ratio declined to 1.83x (from 2.63x).”We note further that subscription-to-offer fell to 3.01x from 4.46x on the 364-Day instrument at the last auction.
“Meanwhile, yields in secondary market has been bullish as average T-Bills yields declined (18bps) to 5.16% (vs 5.34% as at the date of the last auction). “However, we do not expect any significant movement in yields in the near term as inflation expectations points to further moderation,” the analysts stated in an advisory note to investors.
In view of the above, “our rate guidance is informed by the need to strike a balance between the goals of maximizing investment returns and having a successful bid,” Meristem analysts added.
