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Nairaland Forum / Nairaland / General / Investment / JP Morgan Set To List Nigeria In Emerging Market Bond Index (2366 Views)
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JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 9:09pm On Aug 16, 2012 |
--Nigeria to be added to JPMorgan's Emerging Market Bond index in October --Move likely to spur capital inflows to Nigerian bond market, analysts say --Flows could total $1 billion over coming months, JPMorgan economist estimates --Capital inflows also likely to support local currency which has rallied to a 3month high on the news of this listing alone! --GEJ and his crew are definitely doing something right. Clueless? the joke is on you! By Neelabh ChaturvediFRESH AIR |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by 4Play(m): 10:44pm On Aug 16, 2012 |
This is actually rare good news. Not going to get much comments as our forumites are too benighted to comprehend such articles. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by karlmax2: 7:51am On Aug 17, 2012 |
let the haters continue with their propoganda while nigeria move forward.but they should know that YOU CANT BRING A GOOD MAN DOWN!.THIS ADMINISTRATIONS ACHIEVEMENT WOULD SPEAK FOR ITSELF no matter how much they criticize it |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 9:45am On Aug 17, 2012 |
4 Play: This is actually rare good news. Not going to get much comments as our forumites are too benighted to comprehend such articles. It's so sad. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by Nobody: 11:34am On Aug 17, 2012 |
I'm sorry, but permit me to be skeptical about this issue. First, look at this: The 10-year bond yield fell slightly Thursday, to 16%. Where on earth does a government continue to issue debt instruments with such high yield? Even in Spain and Italy, two of Europe's troubled economies, the yield on 10-year bonds is less than 7 percent. The yield on 10-year Spanish bonds dropped 12 basis points, or 0.12 percentage point, to 6.52 percent at 5:05 p.m. London time, the lowest level since July 12 and a fourth day of declines. The 5.85 percent security due January 2022 rose 0.785, or 7.85 euros per 1,000-euro ($1,236) face amount, to 95.31.http://www.businessweek.com/news/2012-08-16/spanish-italian-notes-snap-gain-amid-spain-bank-aid-speculation Check the link below for yield on Italian bonds. The yield on benchmark Italian 10-year bonds rose above 6pc, which is considered the point at which borrowing costs become unsustainable. A higher yield indicates less demand. http://www.telegraph.co.uk/finance/financialcrisis/9300845/Italian-bond-yields-rise-above-6pc-danger-level.html Secondly, can anyone tell us what specific projects these bonds will be tied to? Weren't we promised by the Debt Management Office that all bonds raised by Nigeria will be project-tied? What infrastructural project in Nigeria can justify borrowing at a rate of 16 percent? But going forward, government has decided that next year, any borrowed money whether local or foreign should be tied to specific projects. This is an additional control that government want to introduce to ensure that there is effective utilization of resources- Abraham Nwankwo, November 15, 2010.http://www.businessdayonline.com/NG/index.php/markets/bond-market/16143-bond-issues-to-be-project-tied-from-next-year |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 11:58am On Aug 17, 2012 |
HNosegbe: I'm sorry, but permit me to be skeptical about this issue. First, look at this:I'm sorry but you'd have to prove you actually understand what you're talking about to have your questions answered. On what basis are you comparing the Economies of Nigeria and those of Italy and Spain? What are the local lending rate for bonds and TB's? What is the going rate for bonds issued by other African or developing countries like Ghana, SA and Indonesia? Finally, what makes foreign borrowing desirable in itself regardless of its purpose? Maybe we can actually have a discussion going here who knows. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by Nobody: 12:49pm On Aug 17, 2012 |
Below is the bond yield for Ghana, SA and Indonesia as requested. Ghana: 5-8% (http://www.bloomberg.com/news/2012-08-08/ghana-eurobond-yields-seen-to-reach-record-low-on-exports-1-.html) SA: 7.67% (http://af.reuters.com/article/southAfricaNews/idAFL6E8JH2MM20120817) Indonesia: 5.68% (http://www.thejakartaglobe.com/business/indonesia-bond-yields-at-five-month-low-on-growth-rupiah-steady/535889#Scene_1) And yet the rate on 10-year locally-denominated Nigerian government bonds averages 16.3% (http://www.cenbank.org/rates/govtsecurities.asp). It is SIMPLY RIDICULOUS. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by Nobody: 12:52pm On Aug 17, 2012 |
Here's a post I made in another thread. I believe it relates to this as well. My problem is not with Nigeria borrowing, because debt can be deployed to good purposes. The rule of thumb is that the returns (for a business) and societal welfare (in the case of a government) derivable from deploying the funds generated from the loan MUST surpass the interest being paid on the loan. Seen in this light, the question is whether this debt profile is sustainable given the high interest being paid on these loans. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 2:50pm On Aug 17, 2012 |
HNosegbe: Below is the bond yield for Ghana, SA and Indonesia as requested. Thank you for your effort, now you've earned the right to receive an answer lol. I believe this was where you got it all mixed up; The 10-year bond yield fell slightly Thursday, to 16%. As yields and prices move in opposite directions, that signals some buying. A bond with a 16% yield? we'd have to be really generous to make that kind of offer but I assure you we aren't. So what gives? Did the writer of the article get something wrong? absolutely not, here's why; The second sentence in that quote shouldv'e put you on enquiry but you seemed too eager to prove your point than consider its plausibility. How is it that yield and price seem to have an inverse relationship? wasn't it supposed to be a win-win for investors? well not quite. What you have to understand is the difference between basic terms like "yield" and "coupon rate", while the coupon rate is the govt guaranteed rate, the yield is not a given, but it is subject to fluctuations like your average stock. For example, a govt might issue a bond at a 5% coupon rate which automatically means an investor with a $100 investment is guaranteed a $105 return at the end of the period. However, if the price of the bond (ie the value of your stock which of course is traded in the secondary mkt) falls in the course of trading to say $90 as against the original $100 invested, your yield would automatically increase by same 10% to guarantee your 5% yield, what that means is that the listed yield would now be 5.5% as against the govt issued coupon rate of 5%. On the other hand, if your price rises over and above the coupon value of $100 to say $120 ie a 20% increase, the yield on that bond will decline by same 20% ie 5% now becomes 4% to guarantee the original 5% profit signed up for, no more no less. For the record, Nigerias $500million Eurobond was issued at 7% yield which compares favourably with what obtains in those other nations you posted about. Hope I've helped? |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by Nobody: 3:27pm On Aug 17, 2012 |
Thanks Wesley80 for clearing that up. You've helped my understanding on the difference between coupon rate and yield. If I get you correctly, a $100 bond issued at 7% coupon rate will have fallen to about $92.24 (107/1.16) to make for a yield of 16% which will guarantee the same 7% return on principal. Having said that, I still have reservations about the necessity of such borrowings. Look at the post below again and offer your perspective. My problem is not with Nigeria borrowing, because debt can be deployed to good purposes. The rule of thumb is that the returns (for a business) and societal welfare (in the case of a government) derivable from deploying the funds generated from the loan MUST surpass the interest being paid on the loan. Seen in this light, the question is whether this debt profile is sustainable given the high interest being paid on these loans. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 4:02pm On Aug 17, 2012 |
^ No one is comfortable with borrowing, not governments, not economists, not even the man who's very next meal depends on it and certainly, not me. But fact is, we have to borrow sometimes. Question is should Nigerians be rejoicing at this listing and potential foreign borrowing? Yes, yes and yes. To put this in perspective, if we had a stronger economy much better than SA's, had huge domestic debts of over 30% and do not even have huge capital projects to fund, this listing would still make perfect sense and would still be a remarkable economic feat. In the absence of even all these, I really can not understand the cynicism - don't forget this still is merely a "listing". The reasons for borrowing could be manifold but what cannot be denied is the desirability of foreign cash, the multiplier effect of getting in $1b would be the equivalent of borrowing about $3b - $6b locally not to mention the positive domino effect it would have on local private investments and lending rates. I kinda understand your discomfort with our borrowing giving our history, the watchword as always is 'caution' and setting a threshold to gauge what's acceptable, that said, the immediate benefits of this listing and inflow of non FDI's far outweighs the inherent risks. 1 Like |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by Nobody: 5:36pm On Aug 17, 2012 |
wesley80: ^ No one is comfortable with borrowing, not governments, not economists, not even the man who's very next meal depends on it and certainly, not me. But fact is, we have to borrow sometimes. Question is should Nigerians be rejoicing at this listing and potential foreign borrowing? Yes, yes and yes. Hmmm... Ok let's see... I am just not convinced that this government is gonna manage the proceeds properly without getting us into deeper debt. I'll be sure to monitor the situation closely. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 9:00pm On Aug 17, 2012 |
^ Goodluck to you. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by Nobody: 3:54pm On Aug 18, 2012 |
Errr... It's "good luck", not "Goodluck". Always use the separator to distinguish between a wish and a name. |
Re: JP Morgan Set To List Nigeria In Emerging Market Bond Index by wesley80(m): 4:20pm On Aug 18, 2012 |
HNosegbe: Errr... It's "good luck", not "Goodluck". Always use the separator to distinguish between a wish and a name. I was actually wishing you "Goodluck". |
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