₦airaland Forum

ukay2:
all






Please oga united4real, feelamong...

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

Thanks

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..

osile2012:
[size=18pt]Is it better to trade on 91 days tbills at 10% till liquidity is mopped up from the system. Because investing for 4yrs at 13% is not attractive. I think its even better to invest in tbills at 12.5 for a year than 13% in bond.[/size]

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

Caracta:
It's true. I saw the rate guide but I thought it was a mistake.

Treasury bills is next.

Treasury bills has already crashed na..

Bills we used to buy at 14% now going for 10.5%

I think it wont last though

mekaboy:
Now i regret not paying attention in maths class.

1, what is the yield on 1m for 5yrs bond at 15% auction.

2, does your yield change of the 5yrs period? assumingnyou have bought, will you be getting the same semi annual payment?

3, So when the first auction is 15% the subsequent reopening of the same 5yrs bond will now be sold at a different rate?

Pls can u give a real life example of how the price you pay for a bond changes as the prices go up due to excess liquidity.?

Are u saying a unit of the 2020 bond that was sold at the first auction is sold for 100naira at 15% and you buy 1m of that 100naira units .

Then in the reopening aution, a unit is now sold for 150naira at the same 15%. You mean you now buy the same 15% bond at a higher price?

An example will be helpful. Thanks.

Sincerely it will be difficult for me to explain more than i have done....

I no sabi book enough maybe

1. The yield for the FGN 2020 15.54% (5YEARS) was 13.1% at the last auction

2. The yield changes through out the duration for sure but your coupon does not. But then the yield should only bother you when you intend to sell after you have purchased.....unlike in stocks and most other items in Bonds you buy at high yield and then sell when the yield is lower. If you hold to maturity...you have notin to bother with the yields fluctuation.

3 Yea at the first auction the yield is the coupon rate...ie at par. And subsequent reopening will change depending on the current market conditions..a unit which sold for N100 will now be sold at 105 or even at 95 depending on the market conditions..

It will diff for me to give real life situation....cos things like dirty and clean price will come in...

I will suggest you go in for the next auction...you can bid as little as 1000. It will help you to understand the dynamics bettet..

https://www.today.ng/money/25621/nigeria-overnight-rate-bond-yields-fall-on-excess-liquidity/

Nigeria’s overnight lending rates and bond yields continued to fall on Friday as excess liquidity injected into the banking system by the central bank signalled that Africa’s biggest economy may be considering loosening monetary policy.

The Central Bank of Nigeria (CBN) has been injecting cash into the banking system to stimulate lending and stave off recession, after Africa’s top oil producer suffered a shock as oil prices plunged to record slow growth in the second quarter.

Banking system liquidity in Africa’s biggest economy opened at over 1 trillion naira credit on Friday, driving down overnight lending rates to 0.5 percent, traders said. Though lenders were not willing to trade at the low interbank rates, traders said.

“Markets will continue to be awash with liquidity (but) this is not long-term funds for lending until banks know what the central bank wants to do,” one trader said.
The central bank on Thursday repaid open market bills (OMO) injecting 280 billion naira into the banking system, traders said, adding that the regulator had not issued fresh bills to mop up funds in the past three weeks.

Though system liquidity dropped marginally as some lenders transferred 700 billion naira government revenue to the treasury single account (TSA) with the central bank on Friday, traders were expecting 600 billion naira credit over the next two weeks.

Traders said the excess liquidity has spurred renewed buying from commercial banks and pension funds

FALLING BOND YIELDS

Last month liquidity dried up as authorities ordered commercial lenders to move government deposits into a single account at the central bank, part of an anti-graft drive.
The central bank then lowered cash reserve requirements for lenders to 25 percent from 31 percent in a bid to loosen monetary policy but left its benchmark interest rates on hold at 13 percent.

The secured open buy back (OBB) — the rate at which lenders can borrow from the interbank market using treasury bills as collateral — fell to 0.5 percent on Friday, 12.5 percentage points below the central bank’s benchmark interest rate.

Analysts doubted the excess cash would trickle down to businesses by way of lending as lenders and pension funds look to the bond market for yield.

Yield on the 10-year bond fell to 12.90 percent on Friday, its lowest level since November, down from 13.10 percent on Thursday driven by excess liquidity, traders said.

The benchmark 2024 bond, which has traded as high as 17.32 percent this year, sold at 13.87 percent at Thursday’s primary auction, traders said.

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.

The coupon rate of 15.54 for the FGN 2020 Bond remains the same.....the only thing different is the amount you have paid to purchase that bond.

Yes the yield is different from the coupon rate...the yield takes into consideration the present realities of the market.....it reflects the price you pay to get the bond. Your coupon rate doesnt change at all...

In simple terms you pay more or less than the par value of the bond price which is N100.

Yea..Bond trading is a little more interesting than Treasury bills.

femilola1:
Goodevening feelamong, please pardon my ignorance. I will like to know, with 15M if buy TB of 6months period, is that i'll be getting paid my interest every 6month??

If you buy a TB for 6 months....you will be paid ur interest upfront and your principal paid back to you in 6 months time which is d end of the tenor.

[b][/b]

mekaboy:
Lol, u kinda did. Are u refering to those who are trading on the secondary market? Those that bought and want to sell before maturity? Does this fluctuation affect people who buy from monthly auction and hold till maturity?

Did the FG reduce the interest rates ? Why then did the price go higher? I think if the interest drops the price goes higher.

Hahaha

In the primary market...you can buy a newly issued bond which is issued at par or you buy a re opening of an older bond which is what we see these days in monthly auctions.

When you buy at par; you are obviously buying at the coupon rates....

But when you buy at the re opening of a previously opened bond, you will buy at a yield different from the coupon rate...this yield will then depend on a number of factors like inflation rate, interest rates, liquidity position of the money market and other information in the market.

As interest rates go up....the price of bonds go up...and the yield falls..

Presently the liquidity position of the market is high since when the CRR was reduced to 25%.......so as more funds from banks and PFAs go in pursuit of these bonds....their prices go up and so the yields go down!

No wonder the October FGN bond auctions saw yields dropping to 13.1% from the 15.95% seen in September Auctions.

mekaboy:
Are u saying if i buy bond of 5yrs at 15% . i wont be getting 15% annually but 12%?

Bonds are always a tricky issue to discuss. You can purchase a 15.54% FGN 2020 bond at a yield of 12.5% now.

What t means is that you are now buying the bond at a premium from the former holder. As the yields go down; the price goes up.

However price is what you pay to get the bond. The coupon of 15.54% p.a is still what you will get semi annually. In summary the yields only gives you an idea of the cost of purchasing the assets.

I just hope that I did not confuse even myself!

ukay2:
Oga feelamong..

Which share in stock market should one invest for short and medium term investment?

Thanks

I actually took a punt on UBA today...... Will also be keeping an eye on Access. And Flour mills

mekaboy:
Has FG bond gone interest reduced below 15% ?

The coupon rates for FGN bonds are still unchanged but the yields have dropped massively from the highs of 16% seen 3 weeks ago to about 12.5% today...

debbydee:
Good day house.

i saw this post please i need some clarifications

https://www.nairaland.com/2669816/bad-news-fixed-deposit-holder

cc feelamong

I mentioned a few days ago that rates have crashed across all money market securities like Tbills, Bonds and I expected the Banks to drop their own rates too as all the banks now do is just to trade on these instruments since they don't give out new loans especially at this time when the year is coming to an end soon. so this news is not surprising to me.

This morning I was also informed by Fidelity securities that Their FSL Bond Indexed rates have also been reduced from 13.75% to 12.5%.

Rates are crashing due to the fact that the system is awash with so much liquidity.....

at this junction na to begin to dey watch the stock market small small..

myjoy08:
Sir, Okomu Oil has something special coming based on the rumor and CBN forex restrictions on some product especially palm oil is really helping Okomu oil cash flow which would eventually translate to more payout ratio in terms of dividend to shareholders. As i said, they have something special coming based on the rumor. Remember, your due diligence matter most

BROS leave all this story..

okomu is going no where soon..

some men in black just wanted a good chunk of the coy and it was crossed to them at the agreed rate...

watch it fall back to base soon

bigass:
Its Over. I bought OkomuOil at 19:60 sold today at 32:40 after 65% gain

what is over??

na now the real market go start...

Desanta:
Good move. Your money is safe in NTB.

rates have crashed.....better go for the bonds

WHERE IS THE CAR PARK IN THIS COMPOUND NA?

angelo82:
Barclays is cooking another bad news for Nigeria like the JP MORGAN type..............

They should do quick and bring the bad news o!!

yields are all down now in the money markets and I want to invest in them when the yields are high just like it was when JP Morgan brought their madness

this place dry gan!!!

seems everyone has gone to his farm now...no more easy money for NSE

make I stroll go back to the Treasury Bill thread

Daddi:
pls can you enlighten me on how to go or buy from the secondary market?

just speak to your bankers!

ukay2:
[/color][color=#990000]



please kindly clerify to me why you said THE YIELDS ARE CRASHING AS EXPECTED.....ALSO WHEN WILL THE YIELD START TO GO UP?

THANKS

Yields go up and down based on some prevailing factors; for now the liquidity in the system is the major player.

the TSA issues has been playing a major in the recent days, as it lead to the drying up of the liquidity in the system and thus a rise in the yields recently...but as soon as the CRR was reduced it led to more liquidity and thus a bullish reign in the TBills market thus leading to the drop in the yields.

I will keep monitoring the secondary market activity before buying any Tbills for now..am heavily invested in the Fidelity securities Bond Index Investment Note at 13.75% p.a, and still waiting for the maturity in November

ganilat4:
Crash yield, this time Around. 91 days=10, 182 days=12.20 and 364 days=12.50

The yields are fast crashing as expected....

would be watching the secondary market for the next few days to see if there will be any better deals there...

anything below 13% is a no deal for me

keyman0007:
My criminal bank is saying 9 percent, i think it too low considering that i had a fixed deposit of 8.5 percent with the same bank.

This guys want to rip me off.

Who has idea of the rate 5m for 91 days.

Since after the TSA saga..the yields on Tbills and bonds have all crashed......

timothy001:
Has anyone ever bought the FGB ( Bond ) before? and the procedures.

@mekaboy
@manie
@feelamong

Just go to ur banker or fund manager...they will give you the FGN bond auction bid form...just fill in the details required and you are good.

There is an auction on the 16th

whyniel:
Sir, kindly help with the name of the bank and branch that offer such rate for fixed deposit.

Thank you.

I have used Wema bank and Heritage bank on several occasions....

If you still have any issues...just hola me on feelamong@gmail.com

Agbalowomeri:
Market dey vex for this kain ministerial list?

Clearly..market no like the list

But why is UBA not falling like others name? Abi shareholders for here like d list?

Agbalowomeri:
And my trust for my broker is TEN TIMES than for morgan

there is more to service than just the brokerage commission...

my broker is also able to buy for me at times when am low on cash but can see good opportunities to key in.....

moreover my broker has beautiful sales ladies....

mekaboy:
What is the best way to invest 10m gotten from property sales?

To buy 2020 bond and use the proceeds to be buying treasury bills.

or be buying treasury bills yearly with the money.

or buy bond of 6m and be buying tbills with 4m and the returns from the bond.

Whats the best way to go about this.?

what is your investment horizon?

what if you invest in Tbills and by the end of one year, the rates have crashed? and you now have a bigger reinvestment risk to deal with..

we need to understand your plans for the future and how much risk you are willing to take..

mekaboy:
What is the best way to invest 10m gotten from property sales?

To buy 2020 bond and use the proceeds to be buying treasury bills.

or be buying treasury bills yearly with the money.

or buy bond of 6m and be buying tbills with 4m and the returns from the bond.

Whats the best way to go about this.?

what is your investment horizon?

what if you invest in Tbills and by the end of one year, the rates have crashed? and you now have a bigger reinvestment risk to deal with..

we need to understand your plans for the future and how much risk you are willing to take

hmmmmm!!! eleyi gidi gan!!

make I waka pass!!

vacanci:
What percentage will your coupons be paid. Will it be 15.38% or 15.54%. Also, why will it not be sellable at the secondary market.

Your coupon comes in 15.54%

yea you may not be able to sell in the secondary markets cos at the moment the retail end is noit developed. Most of the players in the Bond markets are the PFAs, Banks, Asset managers. These guys only deal in big bucks and are not ready to purchase Bonds of less than N100M most times!

yomi007k:
Pls how many ppl have invested in FGN bonds.

I'm thinking switching from T-bills to FGN bonds, n wud like 2 know pros n cons becos na my life savings.

I do FGN bonds for targeted issues like my kids sch fees and it makes a whole lot of sence..

got FGN Bonds at 15.38 in August Auction (15.54% coupon).....

just be ready to hold till maturity sha cos its a long term investment especially as ur volume will not be saleable in the secondary market

seems everyone has gone to the CC Tribunal to support Saraki..

itsokay!!