₦airaland Forum

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

AlexLoba001:
I read about someone getting 15% per annum on a Principal of 10million on T.Bills and i laughed; well, let me use this medium to introduce a free risk based/High yield investment product from Equator Capital Asset Management Limited; these products are like the Treasury bills but it gives a little more interest rate on principals and there is flexibility in the tenors.
This products is been referred to as the Treasury/Money market product from Equator Capital Limited, it helps investors fix their fund over a certain tenor with a very competitive interest rate. The interest rate is usually a function of the amount invested and the tenor i.e. the higher the amount and tenor, the higher the interest rate and vice versa. Our tenor spans 30, 60, 90 days and above. You can even terminate your investment before the maturity date and you will get your full principal back with the accumulated interest rate calculated based on the number of days the money had spent with us. And you can also decide to roll-over after maturity. The flexibility is superb.

Interested investor should send me a mail- osowale@equatorcapitalng.com or better still drop your mail so I can forward a comprehensive breakdown of the different investment products which might help you boost your finances and as well enlarge your investment capacities

Best Regards

Oluwatobi

NB: You can check my signature for more information

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..

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..

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

ukay2:
Oga feelamong..

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

Thanks

feelamong:
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...

feelamong:
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...

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

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

feelamong:


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!

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.

feelamong:
[b][/b]

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.

feelamong:


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!

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??

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??

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.

feelamong:
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.

feelamong:
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.

mekaboy:
You will be paid ur interest upfront. then your capital in 6months time.

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.

feelamong:
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..

feelamong:
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..

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]

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]