ghettodreamz:
@All

Did anyone purchase Tbills during the last auction from FirstBank?

I just got off the phone line while I was being told there is not going to be any auction this week until next. Meanwhile, she suggested I include my bidding rate in the request letter. It got me wondering if FirstBank has started allowing their customers to bid or choose their own stop rate contrary to the conventional way of customers going with the bank successful bidding rate.

Please, does anyone has info regarding this? I was surprised hearing that from the lady I spoke with, or maybe it's just a mistake on her part.

egopersonified:
Can someone explain the procedure to terminate treasury bills before the due date? And how much should I be looking at losing if I bought 400k worth for 182 days at 13%.

Caracta:


Write a letter and give at least two weeks notice.

You'd lose 20% of interest accrued. If you remember the interest paid upfront, calculate 20% of it. That amount would be deducted from your principal.

Do you understand?

NairaQuest:


This is totally wrong, TBill interest is not paid upfront but at maturity that is why it is issued at a discount
You are not supposed to be penalized because it is a tradable security . I can tell you more but later

Caracta:


Write a letter and give at least two weeks notice.

You'd lose 20% of interest accrued. If you remember the interest paid upfront, calculate 20% of it. That amount would be deducted from your principal.

Do you understand?

billtommy:


I'm not disputing this, I just need some clarifications, are you saying that the number of days the money had spent in "wherever" won't be taken into consideration? Cos if its like you stated, it means the buyer still gains 80% of his acrude interest after termination, whereas, I think he should loose instead. Or the 20% of his interest will be deducted from his total capital, hereby forfeiting the entire interest that was paid upfront?

billtommy:


I'm not disputing this, I just need some clarifications, are you saying that the number of days the money had spent in "wherever" won't be taken into consideration? Cos if its like you stated, it means the buyer still gains 80% of his acrude interest after termination, whereas, I think he should loose instead. Or the 20% of his interest will be deducted from his total capital, hereby forfeiting the entire interest that was paid upfront?

NairaQuest:


This is totally wrong, TBill interest is not paid upfront but at maturity that is why it is issued at a discount
You are not supposed to be penalized because it is a tradable security . I can tell you more but later

Marpol:
Pls house when is the next bidding date.

Elai147:


Yes you can. Write a signed letter of authorization for the bank to debit your account for the purchase of Tbill and send it to the bank by email. If you're dealing with first bank send an email first and tell them you want to invest in Tbills. They will send you a form to fill and ask you to send a letter of instruction with a valid ID. Send your email to firstcontact@firstbanknigeria.com .

NairaQuest:


This is totally wrong, TBill interest is not paid upfront but at maturity that is why it is issued at a discount
You are not supposed to be penalized because it is a tradable security . I can tell you more but later

angelo82:
Anyone who has ever used STANBIC IBTC should please give details about their professionalism,ethics and other necessary info that can uphold their integrity.....................

ghettodreamz:


This week, hopefully

berexio1:
Your first line is totally wrong. And you wanna teach somebody about TBills? #SingingteacherNoteachMeNonsense

NairaQuest:


If that is how you guys treat it in Nigeria, then you are not following international Accounting Standards.
Treasury bills are issued at discount and redeemed at par. This means that if you buy a 100,000 TBill with a yield of 10%, you will pay 90,000 on settlement day but on maturity you will receive 100,000
That does not constitute up front interest payment. According to International Accounting Standards Board, the IFRS treatment is that you Debit Investment Account with 90,000 and credit Cash with 90,000 when you purchase the TBill but on maturity you credit Investment Account with 90,000, credit Interest Income with 10,000 and Debit cash with 100,000. This means that interest on a TBill is reported when sold or at maturity whichever comes first but not on an accrual basis.


If this is not what is done in Nigeria, then ICAN needs to change the accounting principles

berexio1:
@nairaquest..Our terminologies might be wrong according to ur explanation of the mode of operation of TBills.But what we are trying to say is that u have acess to the full interest accrued to u when u start the investment provided u let it run for the duration u chose unlike other investments where u get the interest prorated and u still get all+principal at the end of the tenure eg fixed deposit

NairaQuest:


Thank you for your response, I think there is a general misconception within the Nigerian Investment community about the interest on TBills. The interest on Tbills is the difference between the discounted price you paid when you buy it and full principal you received when it matures, if you hold it to maturity, or the value you realized if you sell it before maturity. I have read many articles both in the Nigerian media and on forums alluding that TBill interests are paid upfront. I think that this is a misconception.
In essence a TBill is nothing but an IOU issued by a government. It is not too different from the IOU that a friend issues to you as a contractual acknowledgement of debt, the only difference is that TBill is backed by the credibility of the government, which makes it seemingly risk free.
Now, let us assume that a friend tesll you to lend him N50,000 and after 182 days he will pay you back N55,000, will you say that you received N5,000 interest upfront?
In the same way, when you buy a N100,000 worth of TBill from the government by paying N90,000 because the yield is 10%, you are lending N90,000 to the government for 182 days or as the case may be and the government will pay you back N100,000, just like your friend would do.

The only scenario that will amount to upfront interest is if the government credits your account via your bank with N10,000 when you buy the TBill and pays you N90,000 on the maturity date.
If you say that you received N10,000 upfront, and the government pays you back the full N100,000 on maturity, then you would have received N20,000 on N90,000 investment. When looking at TBills, like any other investment (except such derivatives like futures, swaps or forwards which do not involve initial cash flows), you should look at the cash flow. In the case above, the initial cash outflow is N90,000 while the inflow at maturity is N100,000 making the interest N10,000 receivable at maturity.

In terms of access to interest, you have access to the full interest as long as you hold it to maturity, because it paid at maturity but should you decide to sell before maturity, you will either get part of the interest or lose it all or in part depending on the trend of market interest rate because the post issue price of TBill is a function of market rate otherwise called yield. Given the inverse relationship between price and interest rate, if market interest rate rises a great deal, the TB price may reduce so much such that you sell below the value you bought it thereby losing out on the interest for the period you have held it. The reverse will be the case in a situation of falling interest rate.

Thanks once again for the opportunity to engage in this discussion

NairaQuest:


Thank you for your response, I think there is a general misconception within the Nigerian Investment community about the interest on TBills. The interest on Tbills is the difference between the discounted price you paid when you buy it and full principal you received when it matures, if you hold it to maturity, or the value you realized if you sell it before maturity. I have read many articles both in the Nigerian media and on forums alluding that TBill interests are paid upfront. I think that this is a misconception.
In essence a TBill is nothing but an IOU issued by a government. It is not too different from the IOU that a friend issues to you as a contractual acknowledgement of debt, the only difference is that TBill is backed by the credibility of the government, which makes it seemingly risk free.
Now, let us assume that a friend tesll you to lend him N50,000 and after 182 days he will pay you back N55,000, will you say that you received N5,000 interest upfront?
In the same way, when you buy a N100,000 worth of TBill from the government by paying N90,000 because the yield is 10%, you are lending N90,000 to the government for 182 days or as the case may be and the government will pay you back N100,000, just like your friend would do.

The only scenario that will amount to upfront interest is if the government credits your account via your bank with N10,000 when you buy the TBill and pays you N90,000 on the maturity date.
If you say that you received N10,000 upfront, and the government pays you back the full N100,000 on maturity, then you would have received N20,000 on N90,000 investment. When looking at TBills, like any other investment (except such derivatives like futures, swaps or forwards which do not involve initial cash flows), you should look at the cash flow. In the case above, the initial cash outflow is N90,000 while the inflow at maturity is N100,000 making the interest N10,000 receivable at maturity.

In terms of access to interest, you have access to the full interest as long as you hold it to maturity, because it paid at maturity but should you decide to sell before maturity, you will either get part of the interest or lose it all or in part depending on the trend of market interest rate because the post issue price of TBill is a function of market rate otherwise called yield. Given the inverse relationship between price and interest rate, if market interest rate rises a great deal, the TB price may reduce so much such that you sell below the value you bought it thereby losing out on the interest for the period you have held it. The reverse will be the case in a situation of falling interest rate.

Thanks once again for the opportunity to engage in this discussion

berexio1:
Nice one. I agree, you really are a subject matter expert on this one!!!

yemmit90:


I dont think is an expert as you said. He negletected the face value of actually investment upon which interest is being calculated and came up with such pseudo analysis.

Check again the example he gave concerning borrowing from friend, you will see there is no correlation between what he was saying and TB.