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Treasury Bills! Why It Is The Best Investment For Now:

A lot of people have been asking for some time what Tbills are all about and where they could buy the bills from,

This thread is dedicated for all issues related to Treasury Bills, their going rates, when Auctions are due and why they should be bought,

I am not a Finance person, am just a trader who was lucky to work in one financial insitution years back so I might not be the best person to answer questions on this as they come, But am sure we have a lot of financial gurus with CFAs in this Forum and all our questions would be answered,

http://af.reuters.com/article/nigeriaNews/idAFL5E8DO1YI20120224

LAGOS Feb 24 (Reuters) - Nigeria sold 149.65 billion naira ($953.00 million) worth of treasury bills this week with yields on the 182-day and 364-day papers lower than the previous auction, while the 91-day yields rose slightly.
The central bank sold 44.65 billion of the 91-day treasury bill at a 14.80 percent rate, up marginally from the 14.70 percent yield at the previous auction, it said in a statement.

It sold 20 billion naira worth of the 182-day bills at 15.50 percent, lower than the 16.09 percent previously, and 85 billion naira in the 364-day instrument at a marginal rate of 15.55 percent, compared with 16.89 percent at the last auction.

Traders attributed the falling yields on the longer dated treasury bills to the surge in demand from offshore investors.

Total subscription level rose to 476.86 billion naira, compared with 316.85 billion naira at the last auction, underscoring the increased interest in the local debt instrument by both offshore investors and local banks.

Nigeria, Africa's second biggest economy after South Africa, issues treasury bills regularly as part of monetary control measures to help lenders manage their liquidity. ($1 = 157.03 naira) (Reporting by Oludare Mayowa; Editing by Tim Cocks)

http://www.vanguardngr.com/2012/02/dmo-to-slowdown-demand-in-bond-market-as-fg-cautions-against-hike-in-interest-rate/

The planned sale of Federal Government of Nigeria, FGN, bonds valued at N70 billion by the Debt Management Office, DMO, is expected to engender a slowdown in demand in the bond market this week, says analysts at Dunn Loren Merrifield.

The Analysts — Mr. Tola Odukoya and Mr. Jide Nwaogwugwu— in their weekly report, titled, Bond watch, made available to Vanguard, Monrday, however, predicted a bullish trend in the bond market going by the attractiveness of the yields.
They said the Federal Government through the DMO, will this week, offer at the primary auction, N35 billion each of 7.00 per cent October 2019 and 16.39 per cent January 2022 bonds which are trading at 16.03 per cent and 15.95 per cent respectively in the secondary market.

The analysts also cautioned the monetary authorities against increasing the benchmark interest rate — the Monetary Policy Rate — saying any attempt to increase the rate to address current inflationary realities will stifle the growth potentials of the bond market.

According to the, the release of the consumer inflation data shows a significant rise in the Consumer Price Index, CPI, to 12.60 per cent in January 2012, from 10.30 per cent in December 2011.

They blamed the increase in inflation rate to the partial removal of the petroleum subsidy, a development which triggered a spike in food and non-food items as a result of the increase in transportation costs.

“We are however of the opinion that, despite the increase in CPI, monetary authorities should hold benchmark rate at the current level – or possibly reverse the current policy stance – and seek to stimulate economic growth.

“We believe that further increase in the benchmark rate to address inflationary pressure will lead to a possible reversal of the growth of the domestic bond market and further stifle the flow of the long term funding to the real economy,” they said.

In their analysis for the bond market for the previous week, the analysts said the fixed income secondary market continued its bullish run from the previous week across all maturities with the greatest impact felt on the short term maturities and the 16.39 per cent FGN January 2022 bond.

The major driver, they said was the aggressive demand at the treasury bills primary auction, which drove down the discount rates of the 182 and 364 days bills to 15.50 per cent and 15.55 per cent from 16.0975 and 16.899 per cent respectively.

“However, there was a slight increase in the stop rate for the 91 day treasury bills from 14.70 per cent to 14.80 per cent.
“Expectedly, the 5.50 19 February 2013 FGN bond stopped trading as a result of the term to maturity dropping below one year whilst the 9.50 23 Feb 2012, worth N35.0 billion, matured,” they noted.

Sure beats US bonds, I will look into buying some. When is the next auction and how can I buy? (I reside in the US)

I read somewhere you can buy through the money makers such as Zenith Bank. Does anybody know wht their fees are, if any?

http://www.businessdayonline.com/NG/index.php/news/76-hot-topic/34209-nigeria-auctions-n150bn-tbills-with-364-day-yield-rise

Nigeria sold 150.09 billion naira ($953.56 million) worth of treasury bills this week at a regular debt auction with yields on the 91-day and 182-day bills falling, while the 364-day yield inched higher, the central bank said on Friday.

The bank sold 42.97 billion of the 91-day treasury bill at a 14.18 percent marginal rate, down from 14.80 percent at the previous auction, the regulator said in a statement.

It sold 50 billion naira worth in the 182-day bills at 15.48 percent compared with 15.50 percent previously, and 57.12 billion naira worth of the 364-day instrument at a marginal rate of 15.57 percent versus 15.55 percent at the last auction.
The 364-day papers attracted the highest subscription, with investors bidding for a total of 160.58 billion naira. Traders said most off-shore investors prefer investing in the longer-dated bills.

Total demand stood at 328.78 billion naira compared with 476.86 billion naira at the last auction. Nigeria, Africa's second biggest economy after South Africa, issues treasury bills regularly as part of monetary control measures to help lenders manage their liquidity.

Nice Updates, keep them coming

OP
Thanks for the lecture. Please, keep the updates coming. Cheers.

@Omo Yankee... You can actually buy the Tbills from any Commercial bank, or any Discount House in Nigeria....

The fees are 0.125% of the amount invested. However you should be aware that the effective Yield on Tbills is higher that than the advertised discount rate.....as the yield is discounted upfront. So a 14% yield is effectively about 14.25%...

Interesting stuff.

I read from a site that the minimum to invest is 1M and then subsequent multiples of 10k. Is that true? (i hope not)

I think it starts from N100k.

Are these rates annual or monthly

muyoto: I read from a site that the minimum to invest is 1M and then subsequent multiples of 10k. Is that true? (i hope not)

Officially you can invest as little as N1000. But because of the paper work involved and for the fact that the fees u pay to them is very low, most banks and discount houses insist on a min of 100k to N1M.

If you are interested send me a mail to feelamong@gmail.com ..I will introduce you to a friend in a discount house.

blink182: Are these rates annual or monthly

Yes, the rates are annualised pro rata.....but they are also discounted hence the higher yield!

http://www.proshareng.com/news/16648

The treasury bills market was very active during the week, particularly at longer end, as there was high demand for the 07-03-2013 (364day) and 21-06-2012 (91day) bills. In addition, we note that the CBN intends to issue c. N917.77 billion during the second quarter against N960.13 billion out of which shown on the first quarter calendar. The current amount of Tbills issued so far in 2012 is c. N621.89 billion. This shows a slight decrease of 4.41% in the proposed volume to be issued in the second quarter when compared with that of the first quarter.

In the week ahead, we expect the monetary authorities to hold the benchmark rate stable at the least whilst we anticipate a moderate increase in year-on-year inflation. Also, there will be a treasury bill auction of c. N101.23 billion 91day and 182day tenors.

http://www.proshareng.com/news/16687

Nigeria sold 101.22 billion naira ($642.67 million) worth of treasury bills this week at a regular debt auction, with yields on the 91-day inching up while the 182-day bill had lower yields than at the previous auction, the central bank said on Thursday.


The regulator sold 37.49 billion naira of the 91-day treasury bill at a 14.30 percent marginal rate, up from 14.18 percent at the previous auction.


The central bank auctioned 63.73 billion naira in the 182-day bill at 15 percent, compared with 15.48 percent previously, the bank said in a statement.


Total demand stood at 326.57 billion naira versus 328.78 billion naira at the last auction.


Yields on Nigeria's most liquid 3-year government bond fell on the secondary market on Wednesday, after a surprise decline in inflation and a move by the central bank to hold rates steady for a third time in a row.


Nigeria, Africa's second biggest economy after South Africa, issues treasury bills regularly as part of monetary control measures to help lenders manage their liquidity.

@feelamong you've got mail (Bleep)

mkmyers45: @feelamong you've got mail (mkmyers45@gmail.com)

I have replied you!

UNDERSTANDING THE NIGERIAN TREASURY BILLS MARKET

NIGERIAN TREASURY BILLS
These are discountable instruments used by the Central Bank of Nigeria (CBN) to manage liquidity in the system, usually on short-term basis. In recent times, the market has witnessed a tremendous higher yield in the Nigerian Treasury Bills. The tenors are short with a maximum of 364-days with yields far higher in comparison to what the money market offers:

Features of the Nigerian Treasury Bills
 Issuer is the Federal Government through the Central Bank of Nigeria (CBN).
 Typically, Nigerian Treasury Bills are zero-risk and rediscount-able through licensed Money Market Dealers. The Rates are offered on a discount basis and are often referred to as risk-free rates.
 Primary Issue of 91 days and 182 days are offered bi-monthly, while 364 days bills are offered monthly.
 The investor earns upfront interest, hence, invests discounted value.
 They are used by CBN as an instrument for managing liquidity through the Open Market Operations (OMO).
 They are traded actively in the secondary market amongst Banks and Discount houses on an outright or repo basis.
 Liquidity Status: The Nigerian Treasury Bills qualify for liquidity ratio computation.
 It also has an active two-way quote secondary market which provides additional liquidity for all the primary auctions.
 Tenors are short and range from 91, 182 and 364 days.
 Institutions or individuals can borrow using Nigerian Treasury Bills as collateral.
 You can invest as low as N100,000.00 in the Nigerian Treasury Bills.

A FEW LECTURES ON TREASURY BILLS!!!!!

What Are Nigerian Treasury Bills (T-bills)?

T-bills are marketable debt instruments issued by the Federal Government. The Government is obliged to pay the holders of T-bills a fixed sum of money on the maturity date of the securities. When you invest in T-bills, you are lending your money to the Government in exchange for interest payments. The tenors are typically 91, 182 and 364 days (maximum).

Why Does The Government Issue T-bills?

• Provide a liquid investment alternative with little or no risk of default for individual and institutional investors;
• To raise the money needed to pay off maturing debt and finance their operating and development expenditure

Are Treasury bill Investments Considered Safe?

Nigeria's ratings indicate that it has a strong credit rating with a minimal probability of default on its local currency debt obligations. From the perspective of individual investors, this means that T bills are among the safest possible investments to hold, and the principal value of their investments is preserved if held to maturity.

When Are T-bills Issued?

T-bills are issued according to a quarterly issuance calendar that is published on the CBN website (www.cenbank.org).

Prior notice about the auction is published on the website and also advertised in the major newspapers, typically a week ahead of the auctions. Primary auctions are held bi-monthly on Wednesday, while the issuance and settlement is affected on Thursday.

How Is The Auction Conducted?

Through a competitive bid where you have to specify the price (to be expressed in terms of percentage yield) that you are willing to pay for the T-bill. You may or may not be allotted the securities after the auction, depending on how good your price is relative to the prices submitted by all the other competitive bidders. A lower yield represents a more competitive bid as the bidder is indicating that he/she will accept a lower interest rate.

What Role Do Primary Dealer Banks Play In A T-bill Auction?

Only Primary Dealer banks participate directly in the auctions; the total amount of their bids will reflect not just their own bidding interest, but also those bids taken on behalf of investors. The Primary Dealers are appointed to play a role as specialist intermediaries in the money markets. Primary Dealers are obliged to provide liquidity in the market by quoting prices on all issues under all market conditions.

How Is the Discount Rate for T-bills Determined During an Auction?
The cut-off (or highest accepted) yield of successful competitive bids submitted at the auction is equivalent to the discount rate.


As An Investor, Where Are My T-bill Investments Custodised?
Investors with T-bill holdings issued will custodise these with the Primary Dealer banks through which they had originally bid.

What Is The Minimum Investment Amount?
The minimum denomination to purchase is N1,000 (One thousand naira), and you can invest in multiples of N1,000.

Are Capital Gains And Interest From T-bills Taxable For Individual Investors?
Interest income accrued to individual investors is currently exempt from tax

Are There Any Fees For Investors?
The PD will charge investors an administrative fee of 0.0125% of the face value of the investment i.e. A N1m investment will attract a fee of N1, 250.

Where Can I Purchase T-bills?
You may purchase SGS at primary auctions (held through Primary Dealers bi-monthly) or in the secondary market (through daily sales between PDs in the money market).

Can I Sell My SGS Before Maturity?
You can sell over the counter with any Primary Dealer. Prices may change from day to day according to market conditions, and it is important to note that you may not be able to sell for the same price that you paid for them.

How Do I Calculate The Returns On Investment?
Treasury bills are issued at a discount. Therefore, the yield that you get upon the maturity of the bill is the difference between the purchase price and the maturity price. For example, if you pay N95 (discount rate being 5%) for a Treasury bill with a face value of N100 at an auction for a 1-year Treasury bill, your yield to maturity, or amount earned if you hold the bond for one year, is (S$100-S$95) / 95 x 100 = 5.26%.

mkmyers45: @feelamong you've got mail (mkmyers45@gmail.com)

send mail to feelamong@gmail.com

omo-yankee:
Sure beats US bonds, I will look into buying some. When is the next auction and how can I buy? (I reside in the US)

http://www.proshareng.com/news/16725

Nigeria Treasury Bills Issued Programme Second Quarter 2012. (3/27/2012)
Category: Bonds

DATE AMOUNT AMOUNT AMOUNT PROPOSED PROPOSED PROPOSED
Maturing (91) Maturing (182) Maturing(1Yr) Issue (91) Issue (182) Issue (1yr)


29/03/2012 21,838,514 19,081,137 21,838,514 59,081,137

12/04/2012 70,159,210 63,490,874 50,000,000 30,159,210 73,490,874 80,000,000

Some basic terminologies frequently used in Treasury Bills:

OMO (Open Market Operations):
It is used either as an expansionary or as a contraction measure to control the amount of money in the financial system. When CBN buys from the OMO, funds are injected into the system in order to stimulate growth; while sale of OMO by CBN mops up excess funds from the system.

@Feelamong, you are doing a great job and i really appreciate your efforts (sure a lotta others do too) thanks men! keep up the good work and GOD bless.