FREE

The Market Today - 11 September 2018

T-bill yields rise as CBN increases liquidity mop ups                                                      

The Central Bank of Nigeria has increased the spate of OMO auctions, conducting three in the past four sessions, compared to four in twenty-one sessions in August. Furthermore, the stop rate on the longest tenor on offer (c.182DTM) has risen from 12.15% at the first auction in that sequence to 12.50% more recently. As a result, yields on T-bills have advanced in recent sessions despite healthy system liquidity (₦525 billion at the end of yesterday’s session), rising 28bps yesterday. We note that this uptick in yields is in line with our expectation of rising rates in the fixed income market amid rebounding inflation and cautious sentiment as a result of the elections.                                                        

Consumer Goods stocks weigh market at week open                                                    

"The market started off on a negative note, shedding 125bps to start the week on the back of significant sell-offs in the Consumer Goods and Banking sectors. With the market continuing to show signs of weak investor sentiment, low value traded and generally negative intra-day activity, we anticipate another negative close for the market today.                                  

Stock Watch: FO shed 929bps yesterday to settle at ₦19.05, representing a ytd loss of 56%. The stock has shed 17% of its value in the last 11 sessions, hitting a year-low of ₦19.00 last Tuesday.                                                       

T-bills yields advance after CBN mop-up                                                             

"The CBN began the week by offering ₦400 billion across the 73DTM, 136DTM and 199DTM bills at an OMO auction. The apex bank eventually sold just ₦22 billion on the 199DTM bill at a stop rate of 12.50%, with no sale on the other bills. Amid this, system liquidity was ₦525 billion and the Interbank call rate advanced 134bps to 4.17%. Trading remained bearish in the T-bills space, with yields advancing 28bps on average. Sell pressure remained on the short-end of the space with yields on the 73DTM and 80DTM bills notably advancing 84bps and 88bps respectively to settle at 12.90% and 12.64%. Meanwhile, the bond space was more positive amid buying on the shorter-dated maturities. In particular, the yield on the 15.54% FGN FEB 2020 bond moderated 51bps to settle at 14.25%. Despite healthy system liquidity, uncertainty over near-term direction of interest rates (following increases in stop rates at recent primary market auctions) is likely to inspire cautious trading, with investors playing at the short-end of the yield curve.