The Market Today - 04 December 2018
CBN announces redemption of maturing treasury bills
The Central Bank of Nigeria (CBN) announced plans to fully redeem the ₦78.05 billion in maturing treasury bills on the 13th and 20th of December, while those due on the 3rd of January 2019 will be partially redeemed by ₦84.45 billion per instructions by the Debt Management Office (DMO). This means that there will be no Primary Market Auctions held by the CBN in December. The absence of primary auctions this month could lead to greater system liquidity and higher demand in the secondary market as investors re-invest their funds. However, we expect the CBN to push for tighter system liquidity so as to reduce pressure on the naira in the foreign exchange market. As a result, we anticipate an increase in the spate and size of OMO offerings over the next month as the CBN looks to contain naira liquidity.
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. Market breadth remained positive with 20 advances and 17 declines. With market activity resuming its usual pace following the close of the month, we 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 ₦89 billion via a rights issue at ₦12/share. The issue would be executed by offering 6 shares for every 7 shares held by existing shareholders. The stock currently trades at ₦13.40 after gaining 308bps in yesterday’s session, trailing its year-open price of ₦44.19 by 70%.
Market records bearish activity across the curve
The CBN conducted an OMO auction yesterday, offering ₦150 billion across three maturities and selling ₦55 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%. Driven by tight system liquidity and the anticipation of another OMO auction today, we foresee another bearish trading session in the secondary market.
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