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The Market Today - 10 October 2018

Buhari seeks senate approval for $2.8 billion EurobondBuhari seeks senate approval for $2.8 billion EurobondAccording to media reports, President Buhari is seeking Senate approval to raise $2.79 billion in the Eurobond market for the purpose of funding infrastructure projects. We recall that the FG announced plans to focus more on external borrowings in a bid to reduce borrowing costs. We recall that the Federal Government (FG) raised $2.5 billion on 12- and 20-year notes from the Eurobond market earlier in the year at respective rates of 7.14% and 7.70%. We highlight that since the last Eurobond issuance, Global rates have risen – particularly in the U.S. Notably, following consistent rate hikes in the U.S the yield on the 10-year U.S government yield is up c.100bps to 3.2% in the last one year. Consequently, we expect the clearing rates to be much higher than the rates from the previous auction. 
Market reverses course as Consumer Goods drag ASI Negative trading dominated the market yesterday as the ASI shed 8bps, dragged by losses in the Consumer Goods sector which offset gains in other key sectors. Meanwhile, market turnover remained poor at ₦1.5 billion. Market breadth turned negative with 20 advances and 21 declines. With market activity remaining slightly depressed, driven by continuing weak sentiment from investors and general negative trading, we expect further losses in today’s session.  Stock Watch: Despite the sustained interest in Banking stocks, UBA has lost 3% over the last 4 sessions to settle at ₦8.15. The stock currently trails its year high of ₦13.00 by 37% and has lost 21% YTD, underperforming the banking sector (-14%).    Mild buying in fixed income market Amidst relatively stable system liquidity, the interbank call rate declined 33bps to 9.17%. The fixed income market traded mixed yesterday albeit with a positive tilt. Yields across treasury bills declined 5bps on average, with buying weighted at the long end—yields on the 282DTM and 345DTM bills declined 37bps and 14bps to settle 14.20% and 15.13% respectively. Despite this, there were notable yield advances on select bills, with the yield on the 100DTM bill rising 35bps to settle at 12.98%. Trading in the bond market was similar (4bps down on average) albeit with more buying on the shorter-term bonds. Whilst yields on the 15.54% FGN FEB 2020 and 14.20% MAR 2024 bonds moderated 15bps and 8bps 13.93% and 14.97%, the yield on the 10.00% FGN JUL 2030 bond advanced 6bps to settle at 15.04%. We expect relatively healthy system liquidity to support demand in today’s session.