There is a thread on Bonds, so am creating this thread strictly for Eurobonds and all you need to know about.

Following

What are Bonds?
Bonds typical are when a government or corporate organisation borrows money from investors with a promise to pay an agreed interest within a period usually longer than a year. Bonds are long term debt instrument unlike commercial papers/treasury bills that are short term.
Note:
a) They are long term (longer than a year)
b) Usually have an agreed interest rate(coupons)
c) Issued by companies or government

What are Eurobonds?
Eurobonds are bonds issued in a currency different from the native currency of the company or government. So, if china issues bond in naira, since naira is not the native currency of china such a bond would be called Eurobond.
Note: Eurobond currency is different from the currency of the corporate or company of origin.
Let us restrict this thread to dollar Eurobonds since they are the most popular over here in Nigeria.

Why would a company or government issue Eurobonds?
There are so many reasons, lets say company X wants to open a new branch or business or subsidiary in another company that means they will need the other country’s currency to pay for most things or since the company is new in that country they may not have the reputation to be able to raise such bond, the parent company could raise a Eurobond to enable it source the needed capital.

To be continued.........

Booked

Most countries issue Eurobonds to raise capital for capital projects or when the feel foreign debt is more favourable to them than local debt (Treasury bills Etc).
Debt is not bad so long as such funds are used for sustainable projects which over time will pay off, no country or corporate organisation can function optimally without debt. Countries raise funds through debt to carry out capital intensive projects which in turn creates employments for her citizens and increases her internal generated revenue(tax) through which they can service such debt.

Why do people invest in Eurobonds?
Over here in Nigeria, Naira has been very notorious for crazy fluctuations and upward trend, so Eurobonds offer good avenue to invest your funds in dollar more especial if its funds you can keep for a long time and get good returns than just keeping it idle or fixing it with financial institutions. If you are also looking at future dollar obligations like mortgage, school fees etc Eurobonds could also be for you. Again, dollar is a stronger currency than naira so offers more confidence to investors than naira.

Cons of Eurobonds
Eurobonds just like every other bond is a long-term investment and not as liquid as Treasury bills.
Investing in Eurobonds also entails that if for any reason dollar crashes so much more that naira has more value dollar it would surely affect you.
Interest rate risk is another major factor to consider, so if you buy a 6years Eurobond with 5% coupon and after 2 years interest rates raises to let’s say 7% while your bond is already locked at 5%.
We also have default risk which is what if the issuer is on able to payback the money that was borrowed.
Call risk is also another issue with Eurobonds, some Eurobonds have call dates when the issuer can buy back the Eurobonds, so let’s say interest rates fall below the coupon, the issuer can buy back the Eurobonds.

Following religiously

Now that we are here.. Please fire on.

How accessible is Eurobond to ordinarily investor intending to invest..?

What is common rate among issuers presently?

What are the steps to take in order to invest in Eurobond? Can one invest from the diaspora?

Eurobonds are settled at par Value $100 per unit.
When do we say a bond is trading at a discount?
A bond is said to be trading at discount when it’s trading at a value less than the unit price of $100 i.e. $95.50, $99.20, $85.45 etc. when you buy a bond at discount upon maturity of the bond you will be paid back at per value of $100 per value.
When do we say a bond is trading at Premium?
When a bond is trading at a price above the par value then such a bond is said to be trading at premium i.e. $105, $120, $101.40 etc. when you buy a bond at premium please not that upon maturity you will be settled at $100 per unit.

The question on your mind now is, why should I buy a bond trading at a premium when I can buy a bond trading at a discount?
Bonds usually trade at discount when its coupon is lower than prevailing rate so that the discount can account for the low coupon/rate thereby increasing its yield to make up for the low rate while bonds usually trade at premium when its rate is higher than prevailing rate, it’s just a way of maintaining balance.

So, most times bonds trading at premium have higher yields.

So, what should you consider when buying a bond that reflects what you get out of a bond?

OFFER YIELD
Offer yield represents the effective return a bond will give, so if you want to purchase a bond ask your financial adviser what the offer yield is.
If you are buying a bond and you don’t plan to hold till maturity, you may want to consider a bond that is highly liquid and the only way to know this is through the liquidity score which shows how liquid a bond is.

eezeribe is here

seyisanya:
What are the steps to take in order to invest in Eurobond? Can one invest from diaspora?

Depending on the firm you are dealing with all you need is fill their form and send across with required KYC,
send forms to purchse for you,
upon successful purchase you will be issued an investment letter that states the terms of bond.

Yes, you can invest from diaspora

freeman67:
Now that we are here.. Please fire on.

How accessible is Eurobond to ordinarily investor intending to invest..?

What is common rate among issuers presently?

Its very much accessible to anybody who is interested.
No common rate just the coupon of the bond you buy that matters

following

ernie4life:



Its very much accessible to anybody who is interested.
No common rate just the coupon of the bond you buy that matters

How much is the minimum I can buy? Is there anything like that?
And since it’s in dollars , does that mean if I buy now and dollar rises or falls before the maturity. My capital may rise or fall too?

4601CE:
How much is the minimum I can buy? Is there anything like that?
And since it’s in dollars , does that mean if I buy now and dollar rises or falls before the maturity. My capital may rise or fall too?

Minimum you can buy depends on the firm you are dealing with, some collect $10K, $100K, $200K, or $250 so I advise you inquire from the firm you are dealing with to know there minimum.

As regards to fluctuations of dollar what I will say is if you buy with $100K upon maturity you still get you dollars.
the whole transaction is in dollars.

Hello Ernie4life,
Any suggestions on the eurobonds we can consider for a higher return (sovereign, banks...). Also which investment firms do u recommend.

ernie4life:


Minimum you can buy depends on the firm you are dealing with, some collect $10K, $100K, $200K, or $250 so I advise you inquire from the firm you are dealing with to know there minimum.

As regards to fluctuations of dollar what I will say is if you buy with $100K upon maturity you still get you dollars.
the whole transaction is in dollars.

Wiseman456:
Hello Ernie4life,
Any suggestions on the eurobonds we can consider for a higher return (sovereign, banks...). Also which investment firms do u recommend.

Fidelity bank 2022 is currently 10.5% although its trading at a premium but your effective yield would most likely be in 9+ levels which is good considering its dollars

Thanks.
Please which investment firms do u recommend. My stockbroker doesn't seem to understand eurobond.

ernie4life:


Fidelity bank 2022 is currently 10.5% although its trading at a premium but your effective yield would most likely be in 9+ levels which is good considering its dollars

Wiseman456:
Thanks.
Please which investment firms do u recommend. My stockbroker doesn't seem to understand eurobond.

I would recommend the firm am working with, I don't want to mention name so I don't turn this thread to Marketing thread because it's an educative thread but if you send me a Pm I will send you the name so you can make your investigation but I would also recommend you reach out to more some other regulated firms on sec.gov.ng

some Eurobonds trading

Bank coupon Maturity date
Diamond bank 8.75% 21/05/2019
Republic of Nigeria 7.875% 16/02/2032
Fidelity bank 10.50% 16/10/2022
First bank 8.0% 23/07/2021



So, to buy Eurobonds you need to talk to your broker who must be regulated to give you what is available and make recommendations.
With most firms the whole process can be done without visiting the physical office especially for those not in Nigeria, coupons are paid twice a year till maturity, there is always custodian fee usually a percentage of the value of the Eurobond and it’s very small.

Please always make your findings, my write-ups are for educational purposes and should not constitute a basis to make investment decisions, always consult your financial adviser before you make any investment decision.

ernie4life:


I would recommend the firm am working with, I don't want to mention name so I don't turn this thread to Marketing thread because it's a educative thread but if you send me a Pm I will send you the name so you can make your investigation but I would also recommend you reach out to more some other regulated firms on sec.gov.ng

Please recommend for me too I have a strong interest
Hamthablow007@yahoo.com

@ernie4life I did minimum of investment one Vantage Dollar Fund that was once talked about on the Mutual Fund thread around 1st of June but uptill now the certificate of that investment has not been issued. I only got a mail acknowledging the amount paid. Pls any Idea about it?

freeman67:
@ernie4life I did minimum of investment one Vantage Dollar Fund that was once talked about on the Mutual Fund thread around 1st of June but uptill now the certificate of that investment has not been issued. I only got a mail acknowledging the amount paid. Pls any Idea about it?

Still awaiting Sec approval

ernie4life:


Still awaiting Sec approval

Thanks, I just hope the approval will be given before its first tenure expires..

I am intrested in the euro bond. thanks for all the information shared

ernie4life:
Eurobonds are settled at par Value $100 per unit.
When do we say a bond is trading at a discount?
A bond is said to be trading at discount when it’s trading at a value less than the unit price of $100 i.e. $95.50, $99.20, $85.45 etc. when you buy a bond at discount upon maturity of the bond you will be paid back at per value of $100 per value.
When do we say a bond is trading at Premium?
When a bond is trading at a price above the par value then such a bond is said to be trading at premium i.e. $105, $120, $101.40 etc. when you buy a bond at premium please not that upon maturity you will be settled at $100 per unit.

The question on your mind now is, why should I buy a bond trading at a premium when I can buy a bond trading at a discount?
Bonds usually trade at discount when its coupon is lower than prevailing rate so that the discount can account for the low coupon/rate thereby increasing its yield to make up for the low rate while bonds usually trade at premium when its rate is higher than prevailing rate, it’s just a way of maintaining balance.

So, most times bonds trading at premium have higher yields.

So, what should you consider when buying a bond that reflects what you get out of a bond?

OFFER YIELD
Offer yield represents the effective return a bond will give, so if you want to purchase a bond ask your financial adviser what the offer yield is.
If you are buying a bond and you don’t plan to hold till maturity, you may want to consider a bond that is highly liquid and the only way to know this is through the liquidity score which shows how liquid a bond is.

freeman67:


Thanks, I just hope the approval will be given before its first tenure expires..

It has being approved

ernie4life:


It has being approved

Wow this is good news ooo. Thanks for the info..

alonso071:
I am intrested in the euro bond. thanks for all the information shared

i replied your PM but your mail is not going

@ernie4life nice having you educate us on Eurobond, please I will like to ask can I subscribe using a bank or it mandatory using a stockbroker.

KpagoGIN:
@ernie4life nice having you educate us on Eurobond, please I will like to ask can I subscribe using a bank or it mandatory using a stockbroker.

Heard some banks helps clients buy but the still pass through a broker since its a bond.
I recommend a broker but you can use any that you prefer.