Fixed income yields trend upwards following OMO mop-up 

07 November 2018 : The CBN held an OMO auction yesterday, selling N322 billion (N500 billion offered) on the 121DTM, 184DTM and 338DTM bills at stop rates of 11.50%, 13.00% and 14.50% respectively (effective yields: 11.96%, 13.91% and 16.75%). Amid this, the Interbank Call rate advanced 175bps to settle at 4.83%. 

• In the secondary market, trading in the T-bills space turned negative amid the auction news, with selling observed across most tenors and heaviest on the short end of the space. Yields on the 23DTM and 30DTM papers advanced 102bps and 66bps respectively to settle at 9.56% and 12.08% respectively. Selling also continued to dominate in the bond market as yields advanced across board. Particularly, yields on the 12.15% FGN JUL 2034 and 14.50% FGN JUL 2021 bonds advanced 15bps and 9bps to settle at 15.42% and 15.76% respectively. 

• While stop rates at yesterday’s OMO auction came above secondary market levels, analysts expect still healthy liquidity levels – barring another OMO auction – to support buying activity in the T-bills market. Meanwhile, analysts anticipate further yield advances in the bond space, as sentiment remains tepid on the long-end of the curve. 

Consumer Goods lift ASI despite weak sentiment 

• Paring losses from the prior session, the All-Share Index recorded a +33bps gain as notable advances in the Consumer Goods sector outweighed losses recorded across other key counters. 

• Notably, gains in the Consumer Goods (+182bps) sector were supported by DANGSUGAR (+426bps), NESTLE (+362bps), GUINNESS (+137bps) and NB (+125bps). Meanwhile, the Industrial Goods sector (+36bps) also inched up following a 981bps rise in CCNN (+981bps). On the other hand, the Banking sector dipped 53bps as losses in GUARANTY (-184bps) and ACCESS (-125bps) outweighed gains in ZENITHBANK (+63bps) and UBA (+400bps). Finally, the Oil & Gas sector (-13bps) closed lower no thanks to downward movement in OANDO (-99bps). 

Market breadth remained negative with 14 advances and 23 declines. 

Market Outlook 

• Despite yesterday’s positive close, market sentiment remains weak and the overall trend of activity (23 losers vs 14 gainers) points towards another negative close for today’s session. 

• Stock Watch: Following a 155bps loss in yesterday’s session, FIDELITYBK has now lost 8% in the last 7 sessions to close at N1.92, a 23% loss YTD. Analysts note that the bank recently reported a 25% y/y rise in PAT in its 9M’18 results. 

Corporate Disclosures

The Board of Directors of Cement Company of Northern Nigeria Plc has notified the Nigerian Stock Exchange and shareholders of the delay in its release of its management accounts for the quarter ended 30 September 2018 due to an ongoing internal process review occasioned by the recent changes in the senior management team. 

The Board of Directors of Red Star Express has informed the general public of the opening of an office in Burkina Faso – Red Star Express Burkina Faso.

Reporting for EasyKobo on Wednesday , 07 November 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited