Yields advance amid tightened liquidity 

02 November 2018 : At yesterday’s OMO auction, the CBN sold N518 billion (N1 trillion offered) across the 91DTM, 182DTM, 364DTM bills at stop rates of 11.50%, 13.00% and 14.50% respectively (effective yields: 11.84%, 13.90% and 16.95%) in line with previous OMO rates. Following the mop up, the Interbank Call rate advanced 17bps to settle at 4.50%. 

Whilst yields declined 11bps on average, activity in the T-bills space was mixed, with selling observed on the longer-dated maturities whilst the shorter dated bills were in demand. Notably, the yield on the 70DTM declined 49bps to settle at 12.78% whilst the yield on the 350DTM advanced 81bps to settle at 16.79%. Meanwhile, the bond market was more bearish, with yields on benchmark bonds advancing 8bps on average. Particularly, yields on the 12.15% FGN JUL 2034 and 12.40% FGN MAR 2036 bonds advanced 15bps and 17bps respectively to settle at 15.64% and 15.67%. 

With investor sentiment still weak and amidst tightened liquidity, analysts expect sell bias in the fixed income market today, with pressure particularly weighted on the long end of the bills space, as yields in the secondary market adjust towards the higher OMO auction level. 

Driven by sell-offs, November begins where October left off 

The Nigerian equity market shed 142bps at the start of the new month, driven by sell-offs in large-cap Industrial and Consumer Goods stocks. The market remained bearish throughout the session, with investors further drawing down on beaten-down stocks. 

As mentioned above, the Industrial Goods and Consumer Goods sectors were the largest decliners, losing 210bps and 113bps respectively after DANGCEM (-287bps), CCNN (-982bps), NESTLE (-145bps) and DANGSUGAR (-797bps) all dropped points. At a slightly lower degree, the Banking and Oil & Gas sectors also finished lower as a result of losses across ZENITHBANK (-128bps), GUARANTY (-27bps), DIAMONDBNK (-709bps), OANDO (-472bps) and ETERNA (-992bps). 

Market breadth remained negative with 15 advances and 25 declines. 

Market Outlook 

Amidst still weak investor sentiment, analysts expect another negative close to today’s trading. 

Stock Watch: CADBURY shed 10% in yesterday’s session to reach a year-low of N9.00. The company recently released its 9M’18 earnings, reporting a positive bottom line, up from a loss position in the previous year. However, after rising 526bps on the day of the earnings release, the stock promptly resumed its downtrend. The stock has lost 43% ytd and is significantly below its year high of N18.50. 

Reporting for EasyKobo on Friday , 02 November 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited