feelamong:


And who told you that the rates for the 91 days tbills will remain at 10% by the time this one matures?

Am sure you understand the concept of reinvestment risk.....

If you dont need the money for the next 5 years..you are better off locking the funds at a good rate in bonds.....enjoying coupon at 15.54 is not a bad one to me...especially when you consider the fact that Buhari govt might not be too comfortable with the present high yields of Naija Bonds

mekaboy:


Are u saying reopening bonds that are sold are no longer at 15% ?

What i want to understand, if someone buys the 2020 bond now for 1m at 15% , will the person be getting 150k annually on the bond annually or less?

Is the yield diff from the 150k annual payment? Please explain the yields in details. How then is the yield calculated if it is not 15% of the amount u paid.


Also all the bond auctions i saw from the dmo site this year are reopening. They also have up to 15% coupon, does it mean they wont be sold at 15% ?

hmm na wa oo. Tr3asury bills seems more straight forward.

unite4real:


What feelamong has been trying to explain to you in the simplest term is this. if the Bond you want to buy is a 15.54% feb 2020 for example. If you are planning to invest 1 Million Naira. Just know that because it is a reopening bond, make sure you have more than 1 Million in you account. The reason is, Since the yield may change, you may be asked to pay a higher price on it which may be N1,030,000 for the 1M you were targeting. Just know that your annual coupon will be on 15.54%. You pay the price of enjoying that 15.54% from the beginning. On maturity, it is 1M that comes back to you and not 1,030,000. I hope this is simple enough

NB,
the N1,030,000 was just an illustrated figure for what a change in yield may cost you.

mekaboy:


Not so simple lol. So lets say i invest 1.5m in 2020 bond at least at 15.54%. At the end of the 5years i dont get 1.5m but less?

lets get something straight. if i invest 1m in 2020 bond at 15%. yield or no yield, do i get 150k annually? will i get my 1m back at the 3nd of 5years?


But on the other hand, if i understand this. Say fg is selling a unit of this 2020 bond for 1000 and is paying 15%.

So with my 1m i will get 1000 units.

But at the reopening, it is sold for 1200 So with my 1m i can get 833 units .

But i am not interest in the units or yield fluctation. What i want to know if i invest 1m at 15%, do i get 150k at the end of a year and get my one m back.

mekaboy:


Not so simple lol. So lets say i invest 1.5m in 2020 bond at least at 15.54%. At the end of the 5years i dont get 1.5m but less? NO

lets get something straight. if i invest 1m in 2020 bond at 15%. yield or no yield, do i get 150k annually? will i get my 1m back at the 3nd of 5years? YES


But on the other hand, if i understand this. Say fg is selling a unit of this 2020 bond for 1000 and is paying 15%.

So with my 1m i will get 1000 units.

But at the reopening, it is sold for 1200 So with my 1m i can get 833 units .

But i am not interest in the units or yield fluctation. What i want to know if i invest 1m at 15%, do i get 150k at the end of a year and get my one m back. YES

ukay2:
all






Please oga united4real, feelamong...

Please explain this fg bond investment in layman idea...its very interesting..

Thanks

feelamong:


A bond's face value, or price at issue, is known as its "par value." Its interest payment is known as its "coupon."

A $1,000 bond paying 7% p.a has a $70 coupon. Yields could be taken as the price you paid for the bonds.

The prices of bonds fluctuate throughout the trading day as, of course, do their yields. But the coupon payments stay the same.

Say you don't buy the bond right at the offering (At par), and instead buy from somebody else in the "secondary" market. You could buy the bond for $1,100 in the secondary market, though, the coupon will still be $70, the yield is now 6.4% because you paid a "premium" for the bond.,

at times you could even buy at a discount like we saw the last time that yields got up to 16,2% during the JP Morgan debacle.

For a similar reason, if you buy it for $900, its yield will be 7.8% because you bought the bond at a "discount." If its current price equals its face value, the bond is said to be selling at "par."

The bottom line: There are many ways of expressing a bond's return, but "total return" is the only one that really matters. This includes all the money you earn off the bond: the annual interest and the gain or loss in market value, if any.

If you sell that $1,000 bond with the $70 coupon for $1,050 after one year, your total return is $120, or 12% -- $70 in interest and $50 in capital gains. (Prices are usually expressed based on a par value of 100, so when you sell that bond for $1,050 the price would be quoted as 105.)

So in essence the return on bonds is not only calculated with just the coupon especially when you did not buy at par

NB...I used some textbook illustration here..

mekaboy:


So like the last auction where the 2020 was sold at 13.1% it means the federal govt did not sell at par but higher. If they sold at pay then those that bidded for 15% would have got it.

So lets say they sold at N1000 at the initial auction where people got at 15% . The subsequent reopening, they are now selling the same bond at 1100 which might mean 13% because the price has increased.

So the good thing is that the bidder has the right to decide how much they are willing to buy even though the price decreased or increased by their percentage bid. If federal govt decides to sell then your bid is successful.

So if i bid for 16% it means i want to buy that bond that was initially sold at 1000 at par for like 900. My bid might not go through like the last auction which ended at 13% because the cbn was willing to sell above 1000.

So i think the more people willing to buy will determine at what price they decide to sell. If there is more money in the system for those buying then the price goes up and yield comes down.

So when the jp morgan pulled out, some investors that bought at par value of 1000 now decided to sell at 800 to exit. This leading to fall in price and increase in yield.

So i wantnto find out, does it mean its possible to get the 1000 bond at 800 in secondary market?

Do those at secondary market watch the price govt sells at reopening to decide how much they sell theirs?

Say govt sells at 1100 at reopening and i bought at 1000 i can now sell mine at 1050.

And if govt sells at 800 and i bought mine at 1000 selling then mine wont be profitable to sell.

unite4real:


Feelamong has explained all that is required to know. My advice to you you is to first of all know that there are too much intricacies when it comes to bonds. Just have two things in mind, especially for a reopening bond. firstly, the interest you bid is not the interest you enjoy annually (coupon). that interest you bid only helps to determine the price you will be paying to get the bond. Now, secondly, the interest quoted for the bond, e.g 15.54% Feb2020 FGN Bond as advertised is what you will be getting every year. I have mentioned two different interests here.

Let me analyse it. You wanted to buy a FGN bond of 15.54%Feb 2020 reopening with 1M. if you bid at 13%, that will determine the price you pay to get that bond tied to your investment. know that the exact 1M will not be debited from your account because you are not buying at par. Now, the second thing is after you have purchased and successful, your annual interest (coupon) will be on 15.54% and not the 13%.

Does this help?

pallybrown:
please how can a Nigerian staying abroad go about this stuff.... bond or T bill

mekaboy:


Sure it does, thanks. At this point im wondering where it is cheaper priced. Primary or secondary.

feelamong:


As it is now......I doubt you will be able to play in the secondary market. Cos you will need a min of N100M to play there..

mekaboy:


So its to bid at the primary for something very close to 15% until you get it. 13% is at a high price from the par.

ukay2:



AM REALLY LEARNING A LOT FROM YOUR INSIGHTFUL QUESTIONS.

I INVESTED IN FGBOND AUGUST 2015..WAITING FOR MY 1st COUPON COME FEBRUARY 2016

THANKS FOR :

OGAS

FEELAMONG &
UNITED4REAL

AM BLESSED BY YOUR WEALTH OF KNOWLEDGE

THANK YOU.

mekaboy:


Guess u got at par or above 15%

feelamong:


I have been tracking only the 15.54% FGN 2020 cos its the only one I have interest in..

in August it went for 15.38% at the auction, In September it spiked to 15.95% (J P Morgan Effect) and in October it dropped to 13.1%

looking at the Liquidity levels now, I don't think it will get to 13% in November unless these liquidity levels dry up!

timothy001:
@Feelamong

How do you buy from the secondary market at par at this Period if u have above 100 m to put down on it..Or Would you Advice they wait till Nov/Dec To see if it will bounce back to 15:95 %

feelamong:


You cannot move faster than the market....

you can only buy at the yield the market is offering, someone contacted me yesterday and was asking about buying at the 15% levels yield...all I told him was to keep waiting and monitoring the market...

in the interim I suggested to him to invest in short dated Tbills...5 days to 7 days to at least make some money while waiting and monitoring

feelamong:

You cannot move faster than the market....
you can only buy at the yield the market is offering, someone contacted me yesterday and was asking about buying at the 15% levels yield...all I told him was to keep waiting and monitoring the market...
in the interim I suggested to him to invest in short dated Tbills...5 days to 7 days to at least make some money while waiting and monitoring

mekaboy:


Do have tbills less that 91 days, how is that done?

timothy001:


How do i monitor the market on Bond since i have no idea?

rubi96:
Please what is the least amount one can invest in Tbills. I was at GTbank for inquiry and was told their least amount is 500k. Does it mean that someone with 100k can't invest?

feelamong:

in the secondary markets you can even but 3 days Tbills...

mekaboy:


Assuming its a 10% tbill and u buy 7days, for 1m what do u get from that.