Bond auction drives mixed trading sentiment 

25 October 2018 : The DMO conducted a bond auction yesterday, selling N88 billion (N115 billion offered) across the 5-year, 7-year and 10-year bonds at stop rates of 15.00%, 15.15% and 15.32% respectively. Whilst the 5-year and 7- year maturities were undersubscribed and closed in line with previous auction rates (although higher than secondary market levels), the 10- year bond was vastly oversubscribed with stop rates coming in higher than previous auction rates (and lower than current secondary market levels). Meanwhile, system liquidity declined to c.N120 billion and the Interbank Call rate advanced 167bps to 16.67%. 

Trading in the secondary market was mixed with a slightly negative bias, with benchmark bond yields advancing 2bps on average. Whilst yield on the 12.50% FGN JAN 2026 bond advanced 15bps to settle at 15.13%, yield on the 14.20% FGN MAR 2024 bond declined 4bps to settle at 15.10%. The treasury bills market saw a bearish trading session yesterday, with yields advancing 13bps on average. Particularly, yields on the 148DTM and 162DTM bills advanced 43bps and 32bps to settle at 13.36% and 13.36% respectively. 

Following lower allotment levels at the bond auction, analysts foresee increased demand in today’s trading as investors take positions in the secondary market. 

Industrials sell-off drives market into red territory 

The ASI recorded a 237bps decline following steep losses in three of the four key sectors. Market activity remained negative throughout the session with market turnover falling below average once again (N2.3 billion). 

The Industrial Goods (-414bps) sector was the heaviest loser after a steep decline in DANGCEM (-676bps) dragged the sector and ASI overall. Meanwhile, the Consumer Goods (-120bps) and Oil & Gas (-24bps) sectors also lost after NESTLE (-214bps) and OANDO (-278bps) dropped points. Finally, the Banking sector was the sole positive on the day, rising 53bps after gains in ACCESS (+63bps), GUARANTY (+27bps) and ZENITHBANK (+83bps). 

Market breadth turned positive with 18 advances and 15 declines. 

Market Outlook 

Despite the negative performance, market sentiment has remained mixed noting the positive market breadth despite major negative closes across the sectors. Barring another significant Industrials drop, analysts expect sentiment to remain varied in the market. 

Stock Watch: Supported by a 945bps gain in yesterday’s session, DIAMONDBNK has recorded a 16% gain in the last four sessions to settle at N1.39. The stock has lost 7% YTD but is still outperforming the banking sector (-12%). 

Reporting for EasyKobo on Thursday ,25 October 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited