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The Market Today - 08 August 2018

Commercial Paper Issuances on the rise in 2018                                                              

Commercial Paper issuances by corporates have been on the rise so far in 2018 as companies refinance expensive debt amidst a much lower interest rate environment. Treasury yields have averaged 12.4% in 2018 vs. 2017 average of 17.9%. A breakdown of the current Commercial Paper Issuances from the FMDQ shows that interest in the market has been cut across major sectors, including Financial Services, Consumer Goods, and Industrial Goods. Currently, the discount rate on Commercial Paper (CP) listings as quoted on FMDQ show discount rate range of 12% - 14%, much lower than typical bank overdraft rates and a mild spread on treasury securities. Dangote Cement PLC currently has the largest outstanding CP value on the FMDQ after raising ₦50 billion out of its ₦150 billion CP shelf programme. Overall, we foresee further interest in the Commercial Paper market going forward, further supported by the CBN’s recent commitment to invest in Commercial Paper issuances by large corporates at single digit interest rates.                                                   

ASI falls loses ground as large caps stumble                                                       

"The bourse declined 40bps on the back of losses in blue chip stocks across key sectors. The Consumer Goods was the only key sector to notch a positive close – a reversal from the previous session. Market sentiment has been relatively week this week, underscored by low market turnover and pressure on large cap stocks, and we anticipate another soft session today.                                        

Stock Watch: NEIMETH has gained 54% in the past 7 sessions and gained 9.23% in the last session alone. The stock currently trades at ₦0.71, 5.33% below its year-high of ₦0.97.                                    

Bears prevail in the T-bills space                                                             

"The interbank call rate declined 34bps to 7.58% amidst buoyant system liquidity (₦289 billion). Despite relatively healthy system liquidity, trading in the T-bills space was tilted bearish as yields advanced 13bps on average. Most notably, yields on the 44DTM (+28bps to 10.95%) and 170DTM (+36bps to 12.85%) bills rose on the day. Meanwhile, sentiment in the bond space was mixed, albeit with sell pressure observed on mid-dated tenors, as yields on benchmark bonds closed flat on average for the second consecutive session. Specifically, whilst yield on the 15.54% FGN FEB 2020 bond which declined 41bps to settle at 12.93%, yield on the 16.2884% FGN MAR 2027 bond advanced 19bps to 14.24%. Despite tepid trading in the T-bills space, we anticipate a more upbeat session on the back of healthy system liquidity. However, trading on bonds is expected to remain muted in today’s session.