The Market Today - 09 November 2018

Nigeria plans London Eurobond roadshow                                                         

Nigerian officials will embark on a three-day road show in London next week ahead of the planned $2.8 billion Eurobond sale this month. The Senate earlier approved the issuance of the Eurobond from the International Capital Market to finance the 2018 budget and this would be the second Eurobond sale this year after a total sale of $2.5 billion in February 2018 to refinance local currency debt. The cost of foreign borrowing is likely to be higher than for previous issues, on the back of higher yields in developed markets following U.S. interest rate hikes. A $1.25 billion 20-year Eurobond was sold in February 2018 at a rate of 7.696% but closed at 8.672% yesterday. As such, we expect the coupon rate on a similar-tenored instrument to breach the 8% mark.                                                             

Quiet session boosted by Banking sector rebound                                                         

"Despite still varied investor sentiment across the market, the NSE ASI gained 37bps thanks to gains in the Banking sector. Market activity returned to average levels following the previous session spike. Market breadth remained positive with 19 advances and 15 declines. We anticipate slight declines and below-average market activity to close out the week, with investor confidence remaining tepid.                                                             

Stock Watch: After shedding 923bps in yesterday’s session, FLOURMILL has lost 20% in the last eight sessions to settle at ₦15.25, its lowest price since January 2016. The stock is currently trading at a 47% YTD loss.                                                                                                                    

Tight liquidity, weak sentiment to constrain FI activity                                                 

"Amidst a ₦360 billion OMO maturity, the CBN conducted an OMO auction yesterday, selling ₦365 billion (₦600 billion offered) across the 91DTM, 182DTM and 357DTM bills at stop rates of 11.50%, 13.00% and 14.50% respectively (effective yields: 11.84%, 13.90% and 16.89%). In spite of the net mop up, the Interbank Call rate declined 16bps to settle at 3.67%. With system liquidity tighter following yesterday’s OMO, we expect muted activity in the T-bills space to persist. Meanwhile, whilst we see continued tepid sentiment towards bonds, we foresee a mild moderation at the long end of the space as the upcoming $2.8 billion Eurobond offer triggers concerns of a shortfall in domestic supply.