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The Market Today - 10 May 2018

MTN likely to join ranks of bond issuers                                                              

According to Bloomberg, MTN Group Ltd. plans to raise as much as $1.1 billion (₦400 billion) in local currency debt to fund investment plans and refinance existing debt in Nigeria. This supports reports from the Securities & Exchange Commission that it is preparing for a record bond issuance from companies that want to benefit from lower interest rate environment. We had earlier highlighted that with lower yields in the fixed income market and some companies still reluctant to initiate fresh equity offerings, we would expect to see a higher rate of corporate bond issuance in the year. And with lower Federal Government domestic borrowing reducing the crowding out effect of private credit and an improving risk environment, we expect to see more corporate bond issuances before the year.                                        

NSE ASI remains under water                                                   

After another session of mixed trading, the Nigerian bourse closed 18bps lower yesterday, extending losses to two sessions. As indicated by the mixed closes across sectors, sentiment remained mixed in the equity market. We foresee this trend continuing in coming sessions in the absence of any market drivers.

Stock Watch: JAPAULOIL declined 833bps in yesterday’s session. The maritime servicing company recently announced plans to pull out of its $350 million funding arrangement with Milost, an American private equity firm. The stock currently trades at a price of N0.44 and has declined 12% ytd.                    

Sell pressure weighs on Fixed Income market                                                  

In spite of the continued pause in OMO auctions yesterday, Interbank call rate advanced to 7.08% (previous: 6.00%). Meanwhile, sell pressure was spread across the T-bills space with only a handful of buys along the mid to long end of the curve, with yields advancing 33bps on average. Likewise, trading in the bond space was tilted towards the sell side, with selling particularly on longer dated tenors. Yields on benchmark bonds advanced 11bps on average. N273 billion would be hitting the system today via an OMO maturity. Amidst expectations of a mop-up action– in line with recent trend - we expect cautious trading at the start of today’s session as traders wait to see where OMO stop rates will fall.