CBN raises stop rate on long-dated T-bill 

12 September 2018 :The CBN conducted another OMO auction, offering N200 billion across the 121DTM, 198DTM and 324DTM bills. The apex bank eventually sold N82 billion on the 198DTM and 324DTM bills at respective stop rates of 12.50% and 13.20%, with no sale made on the 121DTM bill. Notably, the 324DTM bill closed at a higher stop rate than the similar maturity at the last primary market issue (13.05%). Amid this, the Interbank call rate advanced 216bps to 6.33%. 

 Following the mop-up, yields advanced 30bps in the T-bills space. Selling was concentrated on the shorter-dated bills, with yields on the 37DTM and 79DTM bills advancing 70bps and 74bps to settle at 13.24% and 13.38% respectively. Likewise, trading on bonds was negative, particularly at the short end of the space. Specifically, the yield on the 15.54% FGN FEB 2020 bond advanced 30bps to settle at 14.55%. 

 Given increase in the stop rate on the long-dated T-bill, analysts anticipate yield advances in the secondary market and at the PMA to be held in today’s session. 

Market slides further in the red as sentiment remains weak 

With three of four key sectors closing in the red, the Nigerian equity market slid further in the red, shedding 48bps and extending ytd losses to 12.54%. 

 Looking at sector performances, the Banking sector was worst hit, shedding 305bps due to sell-offs on large-caps, ZENITHBANK (- 293bps), UBA (-449bps) and GUARANTY (-580bps). The Oil and Gas sector also closed down, losing 82bps as FO and OANDO shed 499bps and 381bps respectively. However, it was a battle of the heavyweights in the Consumer Goods sector, with NESTLE’s 959bps uptick edging NB’s -486bps loss, to take the sector 160bps higher d/d. Meanwhile, the Industrial Goods sector closed flat once again. 

 Market breadth remained negative with 14 advances and 31 declines. 

Market Outlook 

Analysts expect further negative trading today as market sentiment remains poor and weak investor appetite keeps activity levels below average – evidenced by poor market turnover. 

 Stock Watch: After losing 17% over 10 sessions, GUARANTY now trades at N32.50, its lowest level since May, 2017. The stock has lost 20.25% ytd and trades at a 37% discount to analyst's target price (TP: N51.58). 

Corporate Disclosures 

The Board of Directors of Julius Berger Nigeria Plc has announced a Group Board meeting on Tuesday 25 September, 2018 to discuss changes to the organizational structure of the company. In light of this, the board has also declared a closed period from 13 September to 27 September 2018. the Nigerian Stock Exchange and shareholders that the CBN has debited Diamond Bank’s accounts with CBN for the full amount of the fine levied against it. 

Reporting for EasyKobo on Wednesday , 12 September 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited