INVESTMENT GUIDE - TREASURY BILLS

Treasury bill (T-Bill) is a short-term debt obligation backed by the government with a maturity of less than one year. In Nigeria, we ususally have durations of 91 days, 182 days and 364 days. The purpose of treasury bills is to help finance the national debt. They are a way for the government to make money from the public. People and corporations can buy treasury bills.
There are many reasons why treasury bills are popular. Not only are they affordable enough that almost anyone can buy one, but they offer fast returns, and they are simple, easy to understand and very reliable. Additionally, the money you gain from investing in treasury bills is exempt from state and local taxes. But you do have to pay federal income tax on it, however. Treasury bills are also a highly liquid form of investment. This means that they are easily tradable. They can be sold on the secondary market and easily converted into cash. If you sell a bill on the secondary market, you sell it to someone else instead of waiting for it to mature.

One of the only downsides to treasury bills is that the returns are smaller than those from many other forms of investment. This is because they are so low-risk.

There will be Treasury Bills Primary Market auction scheduled to hold on Wednesday September 14, 2016.

The government is offering to borrow about N183 billion at this auction. Given the recessive state of the economy and in a bid to aid the prospects of growth, the Federal Government might be unwilling to borrow at relatively higher rates than they did at the last auction. There is also the expectation of an Eurobond issue this month which could further aid with the liquidity that the government requires to initiate some of its economic projects.

Please find below the volumes on offer as well as the stop rate expectations at the auction;

  

TENOR	MATURITY	AMOUNT ON OFFER	LAST STOP RATE	EXPECTED STOP RATE
91  DAYS	15-Dec-16	N48.10bn	14.3890%	13.80% - 14.50%
182 DAYS	15-Mar-17	N48.45bn	17.5000%	16.70% - 17.50%
364 DAYS	14-Sep-17	N86.69bn	18.4240%	18.00% - 18.60%

Kindly note that these expected stop rates are subjective and in no way provide any form of guaranteed insight on the eventual stop rates. Courtesy CardinalStone Partners Limited (cspbrokerage@cardinalstone.com). You can also contact your banker for more information.