Market records bearish activity across the curve 

04 December 2018 : The CBN conducted an OMO auction yesterday, offering N150 billion across three maturities and selling N55 billion on the 192DTM and 353DTM bills at stop rates of 13.50% and 15.00% respectively (effective yields: 14.53% and 17.55%). The stop rates came in line with previous auction rates but higher than current secondary market rate. Meanwhile, the interbank call rate declined 990bps, closing at 6.67%. 

Trading in the fixed income market turned broadly bearish with yield advancement across the curve. Notably, the treasury bills space saw a lot of sell-offs, with yields climbing 28bps on average. Yields advanced across the space, with the most notable on the 101DTM (up 84bps to 14.44%) and 325DTM (up 48bps to 17.10%) bills. The bond market was similarly negative, with average benchmark yields rising 9bps on the day. Specifically, yields advanced 16bps and 8bps respectively across the 14.20% FGN MAR 2024 and 12.40% FGN MAR 2036 bonds to settle at 15.30% and 15.81%. 

Driven by tight system liquidity and the anticipation of another OMO auction today, analysts foresee another bearish trading session in the secondary market. 

Equity market resumes to further declines 

The ASI moderated 24bps yesterday, majorly dragged by a reversal in the Consumer Goods sector. Market sentiment was less bearish than the previous session, albeit gains in the Oil & Gas and Banking sectors were unable to lift the bourse. 

After bucking the negative trend in the previous week, the Consumer Goods (-72bps) sector posted a reversal at week open, driven by losses in NB (-266bps). The Industrial Goods (-3bps) sector also recorded a mild loss as a decline in DANGCEM (-102bps) offset bargain hunting in WAPCO (+308bps). The Oil & Gas sector was the biggest gainer, advancing 207bps thanks to a boost from SEPLAT (+416bps). The Banking sector also recovered marginally, rising 61bps after positive activity on ZENITHBANK (+172bps) and GUARANTY (+87bps). 

Market breadth remained negative with 20 advances and 17 declines. 

Market Outlook 

With market activity resuming its usual pace following the close of the month, analysts expect investors to remain apathetic in the equity market, with few significant trades driving market performance. 

Stock Watch: Following the emergency board meeting yesterday, Lafarge Africa announced today that it would raise N89 billion via a rights issue at N12/share. The issue would be executed by offering 6 shares for every 7 shares held by existing shareholders. The stock currently trades at N13.40 after gaining 308bps in yesterday’s session, trailing its year-open price of N44.19 by 70%.

Reporting for EasyKobo on Tuesday , 04 December 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited