awesomeJ:

Sure.
The probability of buying a bond at its face value is the same as the probability of buying secondary market T-bills at their original discount rates( not so likely)

But secondary market bond purchases don't always happen at premium prices. Look at the snapshot on the previous page of the past auction's result, the 12.75% FGN APR 2023 bonds were sold at a discount (yield at 13.5%). However, the two other bonds were sold at mild premiums.

Good point...., thanks.

awesomeJ:

Bonds are kinda sold in units with each unit having a face value.
so if you buy a 15% APR 2023 FGN bond with 10m at its original price, you'd be having 100,000 units of the bond, and since the coupon is 15%, your annual interest would be 1.5m

Now when you buy at the secondary market, you often don't buy at the original unit price. You may get to buy at say N90 per unit, which implies that you'd only be paying 9m to get thesame 100,000 units.

But at the end of the year, both you who bought at 9m and the other person that bought at 10m, you'd each get 1.5m as interest, because you hold the same number of units. But while his own yield is 15%(1.5m on 10m input), yours is 16.67%(1.5m on 9m input)

So coupon rate indicates the rate at which interest is paid on a bond based on its face value, while yield indicates the actual rate of returns to an investor.

The coupon rate is always indicated in the name of most bonds, and it doesn't change throughout the lifetime of the bond.

Only changes in purchase prices bring about changes in yields to bond investors.

Bonds bought at prices below their face values have higher yields, and vice versa.

Kindly ask for any further clarification if....

Your explanation would have been the case if most of the units for sale is #100 per unit or something below.

Just realized that the units for sale is usually #1000 per unit.

Calebbold:


Your explanation would have been the case if most of the units for sale is #100 per unit or something below.

Just realized that the units for sale is usually #1000 per unit.

Not always 1000. Make your findings. And what does it matter?
All you need do is use 900 and 1000 where I used 90 and 100.

Even at 100,000 a unit, the analysis holds still.

There are lots if bonds with N100 face value though.

awesomeJ:

Just as banks helped us get around the 50m T-bills hurdle. I wish they'll do much regarding this $200k. $10k would make them more accessible.

I do not think so , this is a capital market instrument hence they try to avoid buy today sell tomorrow because bonds unlike tbills are not comparably liquid.

awesomeJ:

Bonds are kinda sold in units with each unit having a face value.
so if you buy a 15% APR 2023 FGN bond with 10m at its original price, you'd be having 100,000 units of the bond, and since the coupon is 15%, your annual interest would be 1.5m

Now when you buy at the secondary market, you often don't buy at the original unit price. You may get to buy at say N90 per unit, which implies that you'd only be paying 9m to get thesame 100,000 units.

But at the end of the year, both you who bought at 9m and the other person that bought at 10m, you'd each get 1.5m as interest, because you hold the same number of units. But while his own yield is 15%(1.5m on 10m input), yours is 16.67%(1.5m on 9m input)

So coupon rate indicates the rate at which interest is paid on a bond based on its face value, while yield indicates the actual rate of returns to an investor.

The coupon rate is always indicated in the name of most bonds, and it doesn't change throughout the lifetime of the bond.

Only changes in purchase prices bring about changes in yields to bond investors.

Bonds bought at prices below their face values have higher yields, and vice versa.

Kindly ask for any further clarification if....

Please help clarify. Would the guy who bought at N90 get 9M or 10M at maturity?

awesomeJ:

Thank God for the rating Agencies. I may be skeptical on any bond with a rating below B+, but I'd be pretty much comfortable with those having B+ or higher.

I know ratings can be manipulated, but I don't think such practice is really prevalent.

Another gauge, is if most asset managers and PFAs are buying into a bond, it'd spell some more comfort for me.

That Visionscape bond, can you give us more info on it.
When did the auction take place?
How could retail investors like us have participated?
When/Where will it be listed,
What funding support do they have from the Lagos state government. (They're the clean Lagos initiative guys right?)

well , they seek to issue 50bn worth of bond and they have done less than 50% , first offer was august 2017 , the last offer was on feb 26 and ended feb 28 worth of 4bn at the rate of 15.75% . The feb offering was the second trench of the 50bn they intend to offer. The bond is fully backed by LASG hence it has an underlying asset of the Lagos state treasury for 50 years. The last bond offering was not caped hence i think it is open to all and sundry. I do not know when the next trench will be auctioned but going by my estimation July, August should be next.

Just2endowed2:


give me link to thisvisionscope bond offerring

Check business day of February 28th 2018 for their last offer

mcci:


Please help clarify. Would the guy who bought at N90 get 9M or 10M at maturity?

Since the guy bought 100,000 units, with each having a face value of N100, he will get 10m upon maturity.

Liljel:


well , they seek to issue 50bn worth of bond and they have done less than 50% , the last offer was on feb 26 and ended feb 28 worth of 4bn at the rate of 15.75% . The feb offering was the second trench of the 50bn they intend to offer. The bond is fully backed by LASG hence it has an underlying asset of the Lagos state treasury for 50 years. The last bond offering was not caped on any value hence i think it is open to all and sundry. I do not know when the next trench will be auctioned.

Thank you for this timely info.
However like you said, we have to watch out for their secondary market liquidity first. Thanks again.

awesomeJ:

Bonds are kinda sold in units with each unit having a face value.
so if you buy a 15% APR 2023 FGN bond with 10m at its original price, you'd be having 100,000 units of the bond, and since the coupon is 15%, your annual interest would be 1.5m

Now when you buy at the secondary market, you often don't buy at the original unit price. You may get to buy at say N90 per unit, which implies that you'd only be paying 9m to get thesame 100,000 units.

But at the end of the year, both you who bought at 9m and the other person that bought at 10m, you'd each get 1.5m as interest, because you hold the same number of units. But while his own yield is 15%(1.5m on 10m input), yours is 16.67%(1.5m on 9m input)

So coupon rate indicates the rate at which interest is paid on a bond based on its face value, while yield indicates the actual rate of returns to an investor.

The coupon rate is always indicated in the name of most bonds, and it doesn't change throughout the lifetime of the bond.

Only changes in purchase prices bring about changes in yields to bond investors.

Bonds bought at prices below their face values have higher yields, and vice versa.

Kindly ask for any further clarification if....

Bonds are units in 1000

awesomeJ:

Thank you for this timely info.
However like you said, we have to watch out for their secondary market liquidity first. Thanks again.

Anytime my boss

Liljel:


Bonds are units in 1000

All these bonds have unit prices of 100

Nairametrics - May 28, 2018

The Past Week (May 21 – 25)
FGN bonds yields remained largely unmoved; it dipped slightly down 5 bps but remained range bound between 13.1% and 13.5%. Marginal rates climb at the May FGN bond sale: At the monthly bond auction, where the Debt Management Office (DMO) had NGN70 billion worth of bonds to sell via auction and NGN30 billion via non-competitive bidding, bid cover ratio declined to 0.9x (April 2.2x) which drove a rise in average clearing rates to 13.5% (April 12.83%). However, the DMO displayed a stingy streak as it elected to only allot 80%.

In summary, despite rhetoric about the need to signal tightening, actual CBN action over the week was to ease on liquidity which had the effect of driving the yield curve lower.

awesomeJ:

All these bonds have unit prices of 100

Euro bonds are priced at 100 while FGN are priced 1000.

It is pivotal to state this difference because EURO BOND is governed by global laws FGN bonds too but they have this peculiarity to Nigeria's. Most often you will see bonds quoted based on % premium or discount.

The idea is to learn here, no aggression no antagonism.

spenca:



Euro bonds are priced at 100 while FGN are priced 1000.

It is pivotal to state this difference because EURO BOND is governed by global laws FGN bonds too but they have this peculiarity to Nigeria's. Most often you will see bonds quoted based on % premium or discount.

The idea is to learn here, no aggression no antagonism.

I didn't argue about the price of the FGN BOND. My post Wash n response to the person who said bonds are "Bonds are units in 1000". That's obviously not always true.

The guy who made the first reference to the price too. He thinks the fact that some bonds trade at 1000, changes anything. That's not the case.

The snapshot below shows FGN bonds are in 1000 but the state and other bonds are in 100.

We shouldn't always be quick to argue on things we're yet to make findings on. I say again that there are several bonds with a 100 face value per unit.

awesomeJ:


I didn't argue about the price of the FGN BOND. My post Wash n response to the person who said bonds are "Bonds are units in 1000". That's obviously not always true.

The guy who made the first reference to the price too. He thinks the fact that some bonds trade at 1000, changes anything. That's not the case.

The snapshot below shows FGN bonds are in 1000 but the state and other bonds are in 100.

We shouldn't always be quick to argue on things we're yet to make findings on. I say again that there are several bonds with a 100 face value per unit.

Nice one, thanks for the knowledge sharing

beyolah:
This thread is being created for anything and everything FGN Bonds including FGN Savings Bonds.
I don't know a lot about it but I'm also looking to invest in bonds...hence,this information gathering quest
Let's move this thread forward by sharing the how-to, tips, tricks and rates of bonds.
Thank you

Cc
Gavrelino123
confluence
awesomeJ
Liljel
ahiboilandgas
ImperialCovfefe
spenca

My findings on Federal Government Bonds.
I was at GTBANK head office today...
The elucidations below are my fact-findings
1.,The 50Million stipulated by DMO on Federal government bonds is for those who want to bid their own rates.
2.,Can one get secondary market tenor..?
Yes you can,but you will have to go with the Bank rates.
The bank purchases in bulk and sells in bits to retail susribers.
Hence,profit orientation.
3.,What is the minimum amount one can suscribe on?
Minimum of 10k and it varies on units,but some banks will peg their minimum as 10k,50k,100k, 500k,or,1m in variant of the bank.
4.,Can one liquiate federal bonds..?
Yes you can,but its not as liquid as TB....
It's a capital market investment,hence,it has to stay for a particular period of time before it can be termed liquid.
Note; Banks are more rigid when selling Bond than TB....Liquidation make take forever depending on the demands.
She evidently,showed me some treated transactions that came from branches.
I'm open to further questions..

awesomeJ:
So I was on the phone with a rep from one of the PDMMs (Stanbic IBTC) this morning.

I asked her for the procedures for buying FGN BONDS, saying emphatically that I meant FGN BONDS and not FGN savings bonds.

She put me on hold for about 5 minutes.

Thereafter she resumed the call to tell me that all I needed to do was pick up an application form from my relationship manager, fill up and submit.

I already figured that out based on my experience with T-bills purchases.

What I actually wanted to know more was their threshold. So I asked "what's the minimum investment I can make"
She responded by saying "N5,000.00"

I reemphasized to her that I was inquiring about the regular FGN bonds with 5 ,10 year tenor and not the savings bonds. I also asked if she could reconfirm as some changes were made to bonds investing last year, she said again "the minimum is N5,000.00"

I just concluded that perhaps all she did while she put me on hold was read up some outdated stuff, as against putting a call through to someone in Treasury that I expected.

Anyways, I'll make some more calls, and Gaverelino123 has promised to visit his bank next week. We await his feedback.

I'll try putting up the phone contacts of some of the primary market dealers so some other forumites can also try reaching them.

My findings on Federal Government Bonds.
I was at GTBANK head office today...
The elucidations below are my fact-findings
1.,The 50Million stipulated by DMO on Federal government bonds is for those who want to bid their own rates.
2.,Can one get secondary market tenor..?
Yes you can,but you will have to go with the Bank rates.
The bank purchases in bulk and sells in bits to retail susribers.
Hence,profit orientation.
3.,What is the minimum amount one can suscribe on?
Minimum of 10k and it varies on units,but some banks will peg their minimum as 10k,50k,100k, 500k,or,1m in variant of the bank.
4.,Can one liquiate federal bonds..?
Yes you can,but its not as liquid as TB....
It's a capital market investment,hence,it has to stay for a particular period of time before it can be termed liquid.
Note; Banks are more rigid when selling Bond than TB....Liquidation make take forever depending on the demands.
She evidently,showed me some treated transactions that came from branches.
I'm open to further questions..

Gavrelino123:

My findings on Federal Government Bonds.
I was at GTBANK head office today...
The elucidations below are my fact-findings
1.,The 50Million stipulated by DMO on Federal government bonds is for those who want to bid their own rates.
2.,Can one get secondary market tenor..?
Yes you can,but you will have to go with the Bank rates.
The bank purchases in bulk and sells in bits to retail susribers.
Hence,profit orientation.
3.,What is the minimum amount one can suscribe on?
Minimum of 10k and it varies on units,but some banks will peg their minimum as 10k,50k,100k, 500k,or,1m in variant of the bank.
4.,Can one liquiate federal bonds..?
Yes you can,but its not as liquid as TB....
It's a capital market investment,hence,it has to stay for a particular period of time before it can be termed liquid.
Note; Banks are more rigid when selling Bond than TB....Liquidation make take forever depending on the demands.
She evidently,showed me some treated transactions that came from branches.
I'm open to further questions..

Thanks sir.

So if I have a GTB account, and I want to buy tomorrow, what's their minimum, could I get offers from them tomorrow or do I have to wait for the next auction. thanks again for the efforts.

awesomeJ:


Thanks sir.

So if I have a GTB account, and I want to buy tomorrow, what's their minimum, could I get offers from them tomorrow or do I have to wait for the next auction. thanks again for the efforts.

Minimum of 10k.........Yes you can tomorrow,
just visit your branch or email your account officer...they will tell you what is available @ the moment..
For proper effectiveness and professionalism,its better transact with head office...!
I went straigh to head office,because i expected cunning response from my account officer.

My bond matures on 31st May,2018. Do I have to fill a form to claim my principal or it will just drop into my account? Will I be paid the half yearly interest along with the principal or only the principal?

Awesome ideas guys. Please what is the current rates for FGN bonds vs TB which i did over 7m with GTB @ 10% for 90days. Does FGN Bond give me better yield than what TB offered me?

Gavrelino123:

Minimum of 10k.........Yes you can tomorrow,
just visit your branch or email your account officer...they will tell you what is available @ the moment..
For proper effectiveness and professionalism,its better transact with head office...!
I went straigh to head office,because i expected cunning response from my account officer.

can gtb be said to be the best for bonds same way as stanbic/ fbn were for Tbills?

GTB usually has one branch, in such cases would it be okay to deal there

Gavrelino123:

Minimum of 10k.........Yes you can tomorrow,
just visit your branch or email your account officer...they will tell you what is available @ the moment..
For proper effectiveness and professionalism,its better transact with head office...!
I went straigh to head office,because i expected cunning response from my account officer.

Thank you so much Sir. God bless you.

wura2020:
My bond matures on 31st May,2018. Do I have to fill a form to claim my principal or it will just drop into my account? Will I be paid the half yearly interest along with the principal or only the principal?

No, you don't have to fill any form. Your funds will automatically hit your account.

You will get the last interest payment alongside your principal on maturity date.

Meanwhile, could you please share with us things such as
When you bought, the bank you bought through, your coupon rate, the tenor, and how the interest payments have been over the years.

Those of us who don't yet have the practical experience would love to learn from yours.

C4Ltd:


can gtb be said to be the best for bonds same way as stanbic/ fbn were for Tbills?

GTB usually has one branch, in such cases would it be okay to deal there

We'll only get to know as more people share experience.

I bought it 5 years ago at the primary issue. That time issuance was under CBN. It was advertised in the newspapers and you are advised to collect application forms from any bank, stock broker or any investment coy like Vetiva. After filling the form, you submit the apllication form to your bank. You state the amount you want to invest and the interest you expect . After auction, the interest rate that wins the bid will be allocated bond.

The interest on the bond is payable twice yearly unfailingly into your account by Federal Government of Nigeria, through the Debt Management Office.

awesomeJ:

Thank you so much Sir. God bless you.

You are welcome sir....God bless you too.

wura2020:
I bought it 5 years ago at the primary issue. That time issuance was under CBN. It was advertised in the newspapers and you are advised to collect application forms from any bank, stock broker or any investment coy like Vetiva. After filling the form, you submit the apllication form to your bank. You state the amount you want to invest and the interest you expect . After auction, the interest rate that wins the bid will be allocated bond.

The interest on the bond is payable twice yearly unfailingly into your account by Federal Government of Nigeria, through the Debt Management Office.

Thank you so much.

mcci:


Please help clarify. Would the guy who bought at N90 get 9M or 10M at maturity?

To my own understanding, he wont get 10M he will get 9M.

Reason:
U used 9m to buy 100,000 units while another person had bought the same 100,000 units for 10m.
Now assuming both of u have 10m , u dt bought at 9m is at an advantage cos u still av 1m to use for urself but u will get back ur 9m at maturity.
Its just that both of u have 100k units which have different naira values.

If there is any other opinion contrary to this abeg tell me o, we are here to learn

opomulero:


To my own understanding, he wont get 10M he will get 9M.

Reason:
U used 9m to buy 100,000 units while another person had bought the same 100,000 units for 10m.
Now assuming both of u have 10m , u dt bought at 9m is at an advantage cos u still av 1m to use for urself but u will get back ur 9m at maturity.
Its just that both of u have 100k units which have different naira values.

If there is any other opinion contrary to this abeg tell me o, we are here to learn

He gets the the face value of the bond at maturity regardless of what he paid for it . In the instance above , the investor bought the bond at a discount hence he will still get the face value of the bond which is 10m. Which increases his yield. Take for instance On Monday i sold at T-bill of face value of 47m at a discounted price of 45m+ plus does that mean the buyer will not get 47m at maturity of the Tbill?

opomulero:


To my own understanding, he wont get 10M he will get 9M.

Reason:
U used 9m to buy 100,000 units while another person had bought the same 100,000 units for 10m.
Now assuming both of u have 10m , u dt bought at 9m is at an advantage cos u still av 1m to use for urself but u will get back ur 9m at maturity.
Its just that both of u have 100k units which have different naira values.

If there is any other opinion contrary to this abeg tell me o, we are here to learn

That's not how bonds work.
You should know that 2 things remain constant throughout the lifetime of a bond:
1. The face value per unit;
2. The coupon rate.

So as long as you have 100,000 units of a bond with a face value of say 100, and a coupon rate of say 15%, you will get interest of 1.5m annually throughout the lifetime of the bond, and you will get 10m on maturity regardless of the price you bought at.

Think of it this way, someone promised to buy one concrete block for 1000 in 5 years' time. As long as you can get 10,000 units of those blocks (at whatever price) you will be getting 10m off the sales.

The implication of someone buying for 9m and getting 10m maturity is that his yield is higher (actually more than 16.7%). The capital gains forms part of the yield. I didn't include that earlier.

Yield to maturity, and accrued interest are two major factors that determine the price of a bond.


Some say bonds calculations are clumsy, I say they aren't. We've just not gotten used to them enough yet.