One-year T-bill crosses 17% after bearish T-bill trading 

29 November 2018 : The CBN held a PMA yesterday, offering and selling N151 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 10.90%, 13.10% and 14.50% respectively (effective yields: 11.20%, 14.02% and 16.95%). With liquidity remaining tight, the interbank call rate advanced 88bps, closing at 17.17%. 

• Meanwhile, trading in the T-bills secondary market was markedly bearish, with selling observed across the space and yields advancing 31bps on average. Most notably, the yields on the 29DTM and 113DTM bills advanced 92bps and 50bps to settle at 13.38% and 13.78% respectively. Interestingly, the 358DTM (Generic 1Yr bill) also advanced 23bps yesterday, closing above 17% (17.09%) for the first time since the start of the year. Conversely, yields moderated 8bps on average across the bond space. Demand was prevalent across the space, with yields notably declining 12bps and 15bps respectively across the 14.20% FGN MAR 2024 and 12.15% FGN JUL 2034 bonds to settle at 15.14% and 15.54%. 

• Whilst trading was not positive in the T-bills space yesterday, analysts expect a resurgence of demand as investors who missed out at the PMA (81% oversubscription) scramble to pick up the bills from the secondary market. Also, supported by an OMO maturity of N128 billion due today, analysts see yields moderating across the T-bills space as they adjust towards PMA rates, barring further action from the CBN. Meanwhile, analysts foresee further yield declines in the bond space, as investors continue to favor the longer end of the curve. 

Bears persist as key sectors continue to shed points 

With three of four key sectors moderating d/d, the Nigerian equity market shed points (ASI: -48bps d/d) for the third straight day. Furthermore, investor sentiment remained weak and market activity was unremarkable. 

• Starting with the positive, the Consumer Goods sector (+8bps) was the sole gainer on the day, thanks to gains in PZ (+806bps) and FLOURMILL (+256bps). On the other hand, the Oil & Gas sector (-79bps) was once again the biggest loser, driven by a steep decline in OANDO (-606bps). The Banking (-17bps) and Industrial Goods (-42bps) sectors were also repeat losers as a result of declines in UBA (-200bps), ACCESS (-141bps), ZENITH (-148bps) and DANGCEM (-155bps). 

Market breadth remained negative with 12 advances and 23 declines. 

Market Outlook 

Whilst the market approaches a 19% YTD loss, the ASI does not seem to have found a floor, as investor apathy and persistent sell-offs of already beaten-down stocks continue to drive markets lower. Analysts foresee another bearish trading session today, with little confidence of a bargain-hunting boost. 

Stock Watch: UBA has shed 6% of its value in the last four sessions to settle at N7.35, 47% below analyst's target price of N13.78. The stock is trading at a YTD loss of 28%, underperforming the Banking sector (-16%).

Reporting for EasyKobo on Thurssday , 29 November 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited