stalwartnaija: We are at it again. I mean the shenanigans that characterized the stock market pre-2008 which eventually led to its collapse is here again but this time the interest in Treasury Bill. If this forum members will remember, the zeal, the interest, the hype which is being exhibited in threads here are of the same magnitude that greeted the capital market before the great crash. Those who burnt their fingers have not learned any lessons by the asking the relevant questions. Questions such as: why did the market crash? why did people lose so much money? what went wrong? how could it have been done better. A little insight: Most investors burnt their fingers because they did not understand the workings of the capital market, hence it was very easy for market operators and the banks who had the money to goad gullible investors through manipulation and the creation of burble prices into buying the shares of otherwise unprofitable entities. Thus, people rushed to buy the shares of a company with little or no fundamental simply because the share price is going up and they expect to make returns in excess of 100% within a few weeks. They pay less attention to the fact that the capital market is long term market primarily driven by economic and industry based fundamentals.

In essence, we should ask the question: why is Treasury Bill offering attractive yields at this time? Is this attraction sustainable? Is what is happening in the money market in line with tested fundamental finance theory?

Nigerian Treasury Bills yields today are the most attractive in the world, except perhaps Ghana. In simple finance theory, the higher the risk in an investment, the higher the return. The reverse is also true, i.e the lower the risk, the lower the return. Treasury Bills and other Government instruments are regarded as risk-free instruments in that it is very unlikely that the investor will ever lose his/her money but at the same time, the yield is usually very low compared to risky assets such as equities.

So when government securities is offering not only a safe heaven but also the most profitable investment window, it is a red flag on the whole equation of the economy. Space will not permit me to go into the specifics, but I will like to sound a warning, that if your interest in TB is the attractive yield be careful because the dance will soon be over as the economy picks. But if you are investing because you are not prepared to take risk, go ahead as you are certain your wealth is preserved. That is the approach the banks are taking by investing their money in TB because the conditions for lending at this moment are not right after they had destroyed the capital market with the same game they are playing with government securities now. But the game is about to change! Just watch out.

excellent write up.....any body that understands investments understands that what is hot today might not be that hot in a year's time....At the moment..this is the best and riskless deal in town...the moment the 10 year bond falls below inflation rate and the yield curve changes then....you will all know that the yield will no longer be that interesting and we will relocate to the equities market.......until then i will challenge anybody that knows a better and far riskless investment to tell me that now!!! or hold his peace forever!!!!

how do you mean here...

feelamong:


excellent write up.....any body that understands investments understands that what is hot today might not be that hot in a year's time....At the moment..this is the best and riskless deal in town...the moment the 10 year bond falls below inflation rate and the yield curve changes then....you will all know that the yield will no longer be that interesting and we will relocate to the equities market.......until then i will challenge anybody that knows a better and far riskless investment to tell me that now!!! or hold his peace forever!!!!

You definitely have time τ̅☺ waste. There aя̩̥̊ε̲̣̣̣̥ people you don't reply. Before the sky falls ☺ƞ us, let the smart ones make quiet money, tax free.

@stalwartnaija: It's not the same thing. Investing in treasury bills is risk-free. There's no guarantee that the rates won't crash, but you're guaranteed to get the current rates when your bills mature, unlike stocks which may be completely worthless by the time you want to sell. The main risk is that inflation may be higher than your expectations at the time of the auction, eroding your gains.

TB is good in Nigeria...buy better to buy American stocks...!

Thank you for the info. I will get a broker now.

very useful information thanks a lot,
so how can i start to invest for this thing ?

sirwilliams: very useful information thanks a lot,
so how can i start to invest for this thing ?

Go to your bank or any bank of your choice and make enquiry.

please don't let your fancy broker and politicians trick you..........with election in France and Greece going this way and growth in china slowing down and gold prices shooting up the dollar which all currencies are derived from is as good as the tissue paper called the dollar......they trick us last time in Nigeria that it cannot affect us.a new one is coming and it will be worse.my advice sell your stocks,bonds and all form of financial securities because once the market breaks it will affect all of these.That was why most our banks went under.President Goodluck Jonathan cannot save you.....Your finance minister is as lost as everyone is...... grin grin grin grin
Your pastors laying hands on you cannot help you because even a man of God died in the bible broke and Elijah had to help his widow because he borrowed money on his house to feed the 40 prophets of God when Jezebel was killing the prophets of God........
so be wise its going to be a had one.......
if you what to know what to do before it happens please read books on financial IQ because we bith know our gals no go sorry for you if you cannot pay your bills grin grin grin grin grin

http://af.reuters.com/article/nigeriaNews/idAFL5E8GB51A20120511

LAGOS May 11 (Reuters) - Nigeria has sold a total of 147.05 billion naira ($932.91 million) in treasury bills ranging from three months to one year with high demand from investors pushing yields lower.
The central bank on Thursday sold 32.05 billion naira worth of the 3-month paper at a return of 13.19 percent, lower than the 13.84 percent the same paper was issued at the previous auction. The result was announced on Friday.

The 50 billion naira worth of the 6-month paper was issued at 13.87 percent, compared with 14.59 percent at the previous auction. The regulator issued 65 billion naira worth of 1-year paper at a return of 13.94 percent, short of the 14.64 percent at an auction last month.

Demand for the paper remained high as total subscription stood at 513.42 billion naira, a slight drop from 540.68 billion naira demanded by investors at last month's auction.

Nigeria, Africa's second biggest economy after South Africa, issues treasury bills regularly to reduce money supply, curb inflation and help lenders manage their liquidity. ($1 = 157.62 naira) (Reporting by Oludare Mayowa; Editing by Joe Brock)

feelamong: http://af.reuters.com/article/nigeriaNews/idAFL5E8GB51A20120511

LAGOS May 11 (Reuters) - Nigeria has sold a total of 147.05 billion naira ($932.91 million) in treasury bills ranging from three months to one year with high demand from investors pushing yields lower.
The central bank on Thursday sold 32.05 billion naira worth of the 3-month paper at a return of 13.19 percent, lower than the 13.84 percent the same paper was issued at the previous auction. The result was announced on Friday.

The 50 billion naira worth of the 6-month paper was issued at 13.87 percent, compared with 14.59 percent at the previous auction. The regulator issued 65 billion naira worth of 1-year paper at a return of 13.94 percent, short of the 14.64 percent at an auction last month.

Demand for the paper remained high as total subscription stood at 513.42 billion naira, a slight drop from 540.68 billion naira demanded by investors at last month's auction.

Nigeria, Africa's second biggest economy after South Africa, issues treasury bills regularly to reduce money supply, curb inflation and help lenders manage their liquidity. ($1 = 157.62 naira) (Reporting by Oludare Mayowa; Editing by Joe Brock)

The yields are really dropping just as expected!

feelamong:


The yields are really dropping just as expected!

Buying the 3 and 6 month bills make sense as then you will be able to make 13%*4 and 13%*2 respectively. When inflation is factored in, the 12 month tenure becomes useless.

blink182: Buying the 3 and 6 month bills make sense as then you will be able to make 13%*4 and 13%*2 respectively. When inflation is factored in, the 12 month tenure becomes useless.

I think you got ut wrong mate.... every rate you see there is per annum and as such pro rated!

Can some1 pls explain to some1 here who doesnt understand the slightest idea on how treasury bills and bonds work.i still understand how shares work.what to look for and how to monitor your shares,but for bonds and tbils,i have no slightest idea.pls i need insight.thanks

feelamong:

I think you got ut wrong mate.... every rate you see there is per annum and as such pro rated!

Please explain, do you mean after the 90 days I won't get paid?

blink182: Please explain, do you mean after the 90 days I won't get paid?

Bros.. U get paid pro rata.........ie 91days divided by 365 days. Same thing with 181 days....181 divided by 365days...

feelamong:
Bros.. U get paid pro rata.........ie 91days divided by 365 days. Same thing with 181 days....181 divided by 365days...

If I am not mistaken, you are saying if the yield is 20% for 365 days then 91 days will be 365/91=4 months, 20%/4=5% ? Therefore 5% will be paid out for the 91 days bills.

well in the past, cyber cafe used to be the in thing and the only money making venture through which hard wo9rking intelligent young Nigerians could rack their mind and estort some unclean sum from their foreign counterpoint whom they consider as the mugus and the the maga. well that may seem like a fairy tale but it is just as true as believing you need oxygen to be alive! virtually every cyber cafe has a clic or group of these yahoo maga who would spend as much as 16 hours daily perfecting their plan on how to trick the magas into paying huge sums. but, come to think of it, are there no better ways by which an average Nigerian could make clean money by taking advantage of the internet? these and some other questions were what i had in mind when i decided to explore the internet and its possibilities> but thank God, i stumbled over a website, www.edirectsms.com and so an advert where the owner said he could build a bulk sms reseller package website for a very psaltery sum of 10,000 naira. this is only about 4months ago, and today, i run a bulk sms website and have several clients that pay me a very fair sum for the service i render to them. although i may not be a yahoo yahoo millionaire, yet i am contented with the measure of business growth which i have. friends, there are very many legal ways to make clean money here in Nigeria with peace of mind. i enjoin you to consult him. it may be one of those lucky breaks you have been waiting for

blink182: If I am not mistaken, you are saying if the yield is 20% for 365 days then 91 days will be 365/91=4 months, 20%/4=5% ? Therefore 5% will be paid out for the 91 days bills.

Yes. Lets use simple arithematic for all to understand.

a. 91 days = 3 months = 1/4 of the given rate.Eg, if rate is 12% in 91 days, it means,actual profit within period is 1/4 x 12% = 3% of capital invested.

b. 181 days = 6 months = 1/2 of the going rate. Eg, if rate is 12% in 181 days, it means, actual profit within period is 1/2 x 12% = 6% 0f invested amount.

365 days == 1 year = 1 of the given rate. Eg, if rate is 12% in 365 days, it means, actual profit within period is 1x12% = 12% of invested capital.

I hope we followed the simple arithematic explanation above.

Happy investing.

jamace:

Yes. Lets use simple arithematic for all to understand.

a. 91 days = 3 months = 1/4 of the given rate.Eg, if rate is 12% in 91 days, it means,actual profit within period is 1/4 x 12% = 3% of capital invested.

b. 181 days = 6 months = 1/2 of the going rate. Eg, if rate is 12% in 181 days, it means, actual profit within period is 1/2 x 12% = 6% 0f invested amount.

365 days == 1 year = 1 of the given rate. Eg, if rate is 12% in 365 days, it means, actual profit within period is 1x12% = 12% of invested capital.

I hope we followed the simple arithematic explanation above.

Happy investing.

Wow, bond is for people and institutions that are highly liquid. Even N5m will barely scratch, consolation is, it is better than tenured accounts.