Greetings NLanders,
I am seeking for concise explanations or first
hand enlightenment on how Bond Rates/Coupons
are being operationalized Over The counter
(OTC) trade, particularly from investors in
government bonds. How do they induce as well
as discourage your investment in terms of their
expected yields?

I am in dire need of explanations as they would
go a long way in my project writing, thanks.

PS: I'm also sourcing for journals/articles on its
dynamics with inflation. I'll be glad if you can be
of help in this regard.

Basics: A bond is a debt to an issuer or a debt investment to a buyer. They can have a tenor of as long as 50 years.
Coupon - semi annual interest payment. A coupon of 8% means you get a payment of 4% of the face value of d bond every 6 months.
face value: Amount you get back on maturity of investment.
The coupon is also based on this.
Premium: A bond of facevalue of #100 sold at109 was sold at a premium.
Discount: A bond of face value of #100 sold for below #100 was sold at a discount. Discount is opposite to premium.
Par: A bond of face value of #60 sold for #60 was sold at par.

There are FGN Bonds & Corporate bonds. FGN Bonds are issued by d federal govt. Corporate bonds are issued by companies. They can be denominated in naira or dollars(euro bonds)
Yield: Total expected inflows minus total outflow all over total outflow.
Now total outflow is cost of buying the Bond(either at premium or discount).
Total inflows = total coupons over tenor of bond + facevalue of bond( u know u get this facevalue back on maturity)

The higher the inflation rate, the higher the yield of a bond should be.
It doesn't make sense that my investment has a lower purchasing power after maturity than before start date.

being:
Basics: Coupon - semi annual interest payment. A coupon of 8% means you get a payment of 4% of the face value of d bond every 6 months.
face value: Amount you get back on maturity of investment.
The coupon is also based on this.
Premium: A bond of facevalue of #100 sold at109 was sold at a premium.
Discount: A bond of #100 sold for below #10m0 was sold at a discount. Discount is opposite to premium.

There are FGN Bonds & Corporate bonds. They can be denominated in naira or dollars(euro bonds)
Yield: Total expected inflows minus total outflow all over total outflow.
Now total outflow is cost of buying the Bond(either at premium or discount).
Total inflows = total coupons over tenor of bond + facevalue of bond( u know u get this facevalue back on maturity)

This write up just made me feel like I didn't go to skol.

being:
Basics: A bond is a debt to an issuer or a debt investment to a buyer. They can have a tenor of as long as 50 years.
Coupon - semi annual interest payment. A coupon of 8% means you get a payment of 4% of the face value of d bond every 6 months.
face value: Amount you get back on maturity of investment.
The coupon is also based on this.
Premium: A bond of facevalue of #100 sold at109 was sold at a premium.
Discount: A bond of face value of #100 sold for below #100 was sold at a discount. Discount is opposite to premium.
Par: A bond of face value of #60 sold for #60 was sold at par.

There are FGN Bonds & Corporate bonds. FGN Bonds are issued by d federal govt. Corporate bonds are issued by companies. They can be denominated in naira or dollars(euro bonds)
Yield: Total expected inflows minus total outflow all over total outflow.
Now total outflow is cost of buying the Bond(either at premium or discount).
Total inflows = total coupons over tenor of bond + facevalue of bond( u know u get this facevalue back on maturity)

The higher the inflation rate, the higher the yield of a bond should be.
It doesn't make sense that my investment has a lower purchasing power after maturity than before start date.

Thank you Sir.

Thus, my deductions:

• Bonds are debt instruments, can be sold at par, discount or premium.

• Coupons are biannual interest payments.

• Yields are mathematically defined.

• Bond investment is positively correlated with inflation.

Questions:
• Where are FGN bonds traded? Is it over the counter (OTC) at the stock market according to theory, or at the debt management office (DMO)?

• How are the bond rates ascertained? Is it
the MPR that is used, as I read it somewhere or ruling body/authority?

Right deductions.
Bonds are traded OTC.
DMO issues them fresh.
Bond rates & prices can be checked on fmdq daily quotations.

being:
Right deductions.
Bonds are traded OTC.
DMO issues them fresh.
Bond rates can be checked on fmdq daily quotations.

Thanks so much Sir. Pls, expect more fundamental questions as I progress in my project writing.

being:
Right deductions.
Bonds are traded OTC.
DMO issues them fresh.
Bond rates can be checked on fmdq daily quotations.

Well said sir, but can you use monetary value as an illustration, so that would be investors can better understand the profit outlook.

I studied mech Engine,but I enjoyed reading your writings. What I learnt:

Bonds are like loans taken by both Government and Corporate Entities

Bonds have a maturity time. After maturity,the lender collects both a face value(the actual money he lent out) and a series of coupons until maturity. The coupons are the basis for his gains.

The yield helps in plotting the growth graph of his investment

The coupons are mostly paid semi-anually,i.e 6months apart in a year.

There should exist a directly proportional relationship between the yield rate and inflation rate. When such a relationship is not in existence then it could be said that the lender received a figure higher than the figure he lent out,but failed to receive a value higher than the face value at the time of purchase. So it's only sensible for the coupon to increase with inflation,this serves as the basis for an increased yield.

Have you really made money from fgn bonds?

being:
Basics: A bond is a debt to an issuer or a debt investment to a buyer. They can have a tenor of as long as 50 years.
Coupon - semi annual interest payment. A coupon of 8% means you get a payment of 4% of the face value of d bond every 6 months.
face value: Amount you get back on maturity of investment.
The coupon is also based on this.
Premium: A bond of facevalue of #100 sold at109 was sold at a premium.
Discount: A bond of face value of #100 sold for below #100 was sold at a discount. Discount is opposite to premium.
Par: A bond of face value of #60 sold for #60 was sold at par.

There are FGN Bonds & Corporate bonds. FGN Bonds are issued by d federal govt. Corporate bonds are issued by companies. They can be denominated in naira or dollars(euro bonds)
Yield: Total expected inflows minus total outflow all over total outflow.
Now total outflow is cost of buying the Bond(either at premium or discount).
Total inflows = total coupons over tenor of bond + facevalue of bond( u know u get this facevalue back on maturity)

The higher the inflation rate, the higher the yield of a bond should be.
It doesn't make sense that my investment has a lower purchasing power after maturity than before start date.

@ illuminated 93: But note that the coupon rate doesn't change. Remember the dictionary meaning of a bond!
Once you as the issuer set the coupon rate, you can't change it till maturity.
Then you didn't talk about the gain due to issuing at a discount- read what I wrote about ds.

Pple make moni from bonds and tbs. Banks make a lot from ds. Pension fund administrators & asset management firms make most of deir revenue from bonds & tbs.
I would rather invest in a TB though than in equity stocks
After Tb, then my next preference is a bond

Isn't treasury bills a kind of bond?

If the coupon is set from the beginning,then what is the talk about changing interests rate as regards bonds?

Thanks in advance.

being:
@ illuminated 93: But note that the coupon rate doesn't change. Remember the dictionary meaning of a bond!
Once you as the issuer set the coupon rate, you can't change it till maturity.
Then you didn't talk about the gain due to issuing at a discount- read what I wrote about ds.

Pple make moni from bonds and tbs. Banks make a lot from ds. Pension fund administrators & asset management firms make most of deir revenue from bonds & tbs.
I would rather invest in a TB though than in equity stocks
After Tb, then my next preference is a bond

illuminated93:
Isn't treasury bills a kind of bond?

If the coupon is set from the beginning,then what is the talk about changing interests rate as regards bonds?

Thanks in advance. How is it that some

Nobody is talking about changing coupon rates. It was just a discussion on how inflation rate can affect coupon rate set by the issuer. Tb is also a debt instrument. Difference is it's one year or less and there is no coupon.
So it's always issued at a discount- this is how profit is made. So there are Treasury bills & there are bonds.

Ortarico:


Thank you Sir.

Thus, my deductions:

• Bonds are debt instruments, can be sold at par, discount or premium.

• Coupons are biannual interest payments.

• Yields are mathematically defined.

• Bond investment is positively correlated with inflation.

Questions:
• Where are FGN bonds traded? Is it over the counter (OTC) at the stock market according to theory, or at the debt management office (DMO)?

• How are the bond rates ascertained? Is it
the MPR that is used, as I read it somewhere or ruling body/authority?

Ontarico pls can u contact me. 08175625834 or chinaza37@gmail.com

Nazareth10:
Ontarico pls can u contact me. 08175625834 or chinaza37@gmail.com

All right

Somebody help please, it's urgent!
How can one measure bond investment decisions in one's model? I thought of using investment rate but it seems there's no data for such...

On the other hand, CBN publishes data on the Marginal Rate of FGN Bonds, but I don't know if it's that of the sales. Should I use that instead?

Ortarico:
Somebody help please, it's urgent!
How can one measure bond investment decisions in one's model? I thought of using investment rate but it seems there's no data for such...

On the other hand, CBN publishes data on the Marginal Rate of FGN Bonds, but I don't know if it's that of the sales. Should I use that instead?

You need to communicate clearer- what's d meaning of bond decision measurements? How can u measure a decision - is it a quantity? What d heck is marginal rate?
Deir is rate of returns, yield rate, coupon rate but not marginal rate!

being:


You need to communicate clearer- what's d meaning of bond decision measurements? How can u measure a decision - is it a quantity? What d heck is marginal rate?
Deir is rate of returns, yield rate, coupon rate but not marginal rate!

I also thought as much o. My supervisor changed my topic to include bond investment decisions in Nigeria. I became confused, and that led me to looking for its proxy. I later used annual average dividend yields to represent it. Thanks for your assistance sir, I so much appreciate.

Ortarico:
Greetings NLanders,
I am seeking for concise explanations or first
hand enlightenment on how Bond Rates/Coupons
are being operationalized Over The counter
(OTC) trade, particularly from investors in
government bonds. How do they induce as well
as discourage your investment in terms of their
expected yields?

I am in dire need of explanations as they would
go a long way in my project writing, thanks.

PS: I'm also sourcing for journals/articles on its
dynamics with inflation. I'll be glad if you can be
of help in this regard.

Yipee! Thanks everyone for your contributions on my project especially @being for his invaluable input. I got a distinction in it and it was requested for scholarly publication. Thank you so much people of God!