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Investors Sell Off Nigerian Bonds Over Good Governance Concerns Amid High Yields / Which Is Better; Fixed Deposit Or Bonds? / Nigeria Bonds Rise After Buhari Presidential Election Win (2) (3) (4)
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Re: Bonds Investors Hub by cooldudeng(m): 8:38pm On May 31, 2018 |
akinola98: It varies with company. Afrinvest minimum is N20Million Please not that this is not a sales pitch as i do not have any relationship with them. Do your due diligence, i'm sure there will be other company that are willing to sell with a lower entry amount. You can as well start an investment club with your friends of like minds where funds are warehouse and invested as a lump sum. |
Re: Bonds Investors Hub by cooldudeng(m): 8:40pm On May 31, 2018 |
awesomeJ: Thanks for taking a good stab at this! Finally got through to them and i was advised to focus more on the implied price and the coupon rate. Would still continue with my research to see ho the final figure was arrived at. Cheers |
Re: Bonds Investors Hub by akinola98: 10:05pm On May 31, 2018 |
cooldudeng: Thanks for the advice |
Re: Bonds Investors Hub by Egie4real: 12:13am On Jun 01, 2018 |
awesomeJ:I think it is far less than that...they pool the fund together from various investors to invest in the bond. But my take in that is that 6% is low as the interest rate even though all payments will be made in USD. The fairly stable forex at the moment might tempt one to converting the USD to NGN, invest and reconvert the money to USD when it matures! 1 Like |
Re: Bonds Investors Hub by Egie4real: 12:30am On Jun 01, 2018 |
I will be interested in such (visionscape) after 2019 elections because they are highly politically exposed. awesomeJ: |
Re: Bonds Investors Hub by Egie4real: 12:41am On Jun 01, 2018 |
awesomeJ:Hence from your explanations, it is always more profitable to purchase bonds at the secondary market? |
Re: Bonds Investors Hub by cooldudeng(m): 1:08am On Jun 01, 2018 |
Egie4real: Not exactly. If you read up the trend, you would see that for the short and mid-term bonds, they are sold at a premium in the secondary market e.g Feb 2020 being sold at over N100 per unit (about N105.04). The implication is that, if you were to invest 10million now, you will only get 95,201 units (10,000,000/105.04) and on maturity that will be 9,520,100 (looking at just the principal) as against the N10million invested. However, the coupon, being interest earned would have paid off for the loss on maturity. So net, you still would make a profit considering the subject bond has a coupon rate of 15.54% meaning that (95,201 * 15.54) N1,479,423.54 would be paid annually over a 2 year period. Also, based on the fact that the bond is even 3 months gone from issuance (issued March 2018), you won't have to wait 2 years but 21 months to get the aforementioned payment in full since the first interest as not even been paid and would only be due in August (6 months after issuance). Net you will get a total of cN12.5million from an investment of N10million Now do the maths for someone that actually bought at par (N100) and his planning on waiting till maturity. He would have earned more Please note that bonds are impacted my interest rate (inversely proportionate) and this risk is only eliminated when you wait till maturity. The Gurus in the house can confirm the above computation as this is based on my research. I never get the entry level money to do bond. 5 Likes |
Re: Bonds Investors Hub by awesomeJ(m): 9:07am On Jun 01, 2018 |
Egie4real:I have to mention that the reason it seems my analysis of secondary market bond purchases tend to imply a higher yield is that I've only been considering bonds purchased at a discount. If the purchase price were at a premium to the bond's face value, the yield would be lower. The instance cooldudeng gave in his post above, buttresses this point. |
Re: Bonds Investors Hub by JustBasic: 10:10am On Jun 01, 2018 |
Firstly, many thanks for your meticulous explanation. I have come to be an avid fan of your posts on this and the TB thread. Regarding the calculations below, it is nicely done but I'm having issues understanding where the 80 in the calculation of the total coupon receipts comes from. The only related info relating to 80 is the one below on the previous page by @kolping: ........ However, the DMO displayed a stingy streak as it elected to only allot 80%. Is this the origin of the 80 in your calculation? Can you please shed more light on that? Many thanks and best wishes. awesomeJ: 1 Like |
Re: Bonds Investors Hub by Egie4real: 10:11am On Jun 01, 2018 |
awesomeJ:Exactly what I was thinking about. This thread has really been impactful! But why would bond be sold at a discount? Could it be desperation to offload the bond? |
Re: Bonds Investors Hub by akinola98: 10:20am On Jun 01, 2018 |
Hello All I have been following this educative discussion with immersion. People have mentioned buying FBN bond from secondary market with 1M, 5M, 10M Am yet to see an institution that collect such for the purchase even the ones I contacted yesterday told me it is a minimum of 50M, one even said 100M to buy from secondary market Can someone please list institutions that collects 20M and less for purchase of FBN bond from secondary market. Thanks 2 Likes |
Re: Bonds Investors Hub by cooldudeng(m): 11:37am On Jun 01, 2018 |
Egie4real: The going rate is influenced by interest rate Take for example, let’s assume I bought a bond 5 year bond at say 12% coupon rate. When interest rate goes up say from 200bps (+2%), this wold likely impact on other investment vehicle say T-bills and newly issued bonds making them have a higher yield or coupon rate. Hence, investors will shun existing bonds and a bond holder that’s willing to cash out will have to sell at a discount so the effective yield can be attractive. That’s the inverse relationship I was taking about. Oga awesomeJ can add a piece to this. Me sef na still learner 1 Like |
Re: Bonds Investors Hub by awesomeJ(m): 12:23pm On Jun 01, 2018 |
JustBasic:Thanks for the nice words. This is where the 80 came from: Face value of the bond is 1000, Coupon rate is 16% this means the coupon receipt on each bond unit is 160 per year (16% of 1000) Since coupons are paid twice per year, each coupon payment would be 80 (160/2) 1 Like |
Re: Bonds Investors Hub by awesomeJ(m): 12:26pm On Jun 01, 2018 |
cooldudeng:There's nothing else to say. You've said it all. Mean while. you still have to finish the number crunching to see how the quoted yields are gotten. You are good with numbers yourself, and more good heads- they say-are better than few. 2 Likes |
Re: Bonds Investors Hub by spenca: 5:28am On Jun 02, 2018 |
awesomeJ Yield is simply calculated as C/cp C: coupon (in monetary value) CP: clean price ( amount used to purchase the instrument) The formulae you used above is similar to that of TRR. |
Re: Bonds Investors Hub by awesomeJ(m): 9:37am On Jun 02, 2018 |
spenca:what's TRR please? Look at these secondary market offers posted by cooldudeng? 1. Feb 2020, coupon is 15.54%, price is 104.55, yield is 12.5% 2. Jan 2022, coupon is 16.39%, price is 108.57, yield is 13.35%. Could you please help us know how they arrived at those quoted yields. I suppose a bond only trades at its clean price either at issue or on a coupon payment date right? I'll be glad to learn from any contribution you make at helping us see how those yields were arrived at. Thanks |
Re: Bonds Investors Hub by Nobody: 9:59am On Jun 02, 2018 |
awesomeJ: If I invest 10m for the 2022 coupon, how much will be my interest annually. Thanks |
Re: Bonds Investors Hub by awesomeJ(m): 11:28am On Jun 02, 2018 |
GODAKPAN:Good morning to you sir. Since the offer price of the bond is 108.57, if you buy with 10m, you'd be getting 92,106 units (10m/108.57) Now the face value of the bond is 100 per unit and the coupon is 16.39 per unit per annum. so your annual coupon receipts would be 1,509,617.34 (16.39*92106). This may make it seem like your yield is 15.09% (1.509m on 10m) as Spenca is suggesting. But you have to consider the fact that when the bonds mature in Jan 2022 (3.67 years' time). The principal that'll be returned to you will be 9,210,600 and not 10m. This implies that you'll be having a capital loss of about 789400 over a 3.67 year period. This translates to an annual loss of about 215095. When you net this off your annual coupon receipts, it becomes obvious that your real annual returns on the 10m investment is about 1,294,522 Making the effective yield 12.94% The yield quoted is 12.5% So I'm still trying to understand why there's a difference. But basically, you should realize that while you may be getting 1.5m in annual coupons, your real returns are not as much when you factor in the capital loss. 3 Likes |
Re: Bonds Investors Hub by engrken2(m): 11:45am On Jun 02, 2018 |
My sincere appreciation to various explanatory ideas.. But we will want more direct and practical bond sale prospect when ever there is or if there is any in the market now... |
Re: Bonds Investors Hub by Agbaletu: 11:50am On Jun 02, 2018 |
awesomeJ:It is safe to say that based on this analysis the return does not worth it, having lost part of the principal. This bond of a thing is confusing. |
Re: Bonds Investors Hub by awesomeJ(m): 11:57am On Jun 02, 2018 |
Agbaletu:You should always focus on the yield sir. Despite the loss in capital the net yield is still about 12.5 % (as quoted). That's still currently higher than T-bills. It's often more attractive when the bond is purchased at a discount. The yield would be higher. |
Re: Bonds Investors Hub by awesomeJ(m): 12:01pm On Jun 02, 2018 |
engrken2:You can always buy bonds on any given day at the secondary market through your banks, brokers or investment houses. The issue we're trying to walk around is the minimum investment threshold. So far we have: FSDH 50m GTI securities 100m Afrinvest 20m FGN BOND Primary market 50m FirstBank Eurobonds $100k Most other Eurobonds $200k 2 Likes |
Re: Bonds Investors Hub by Agbaletu: 12:21pm On Jun 02, 2018 |
awesomeJ:You are right. |
Re: Bonds Investors Hub by engrken2(m): 3:31pm On Jun 02, 2018 |
OK so can one invest 100k-1m in any of this... Which one can give us high yield.. If no please notify us wen |
Re: Bonds Investors Hub by awesomeJ(m): 3:48pm On Jun 02, 2018 |
engrken2:currently, it's only the savings bond I know has very low threshold (even below 100k), Gaverilino mentioned that one can buy with 10k upwards from GTbank, and i earlier posted that a rep from Stanbic said 5k upwards. I kinda feel these may be old figures. maybe you could try asking your bank too. I want to also find time to ask at FBN and maybe Zenith too. After meeting the required threshold, buying is as easy as filling a form, or writing a letter. ease of premature termination is also to be keenly considered 2 Likes |
Re: Bonds Investors Hub by engrken2(m): 4:27pm On Jun 02, 2018 |
OK thanks... Let's me hold on to fgn bond |
Re: Bonds Investors Hub by spenca: 5:20pm On Jun 02, 2018 |
awesomeJ: What you have there boss is the yield to maturity (YTM) TRR : total rate of return |
Re: Bonds Investors Hub by Nobody: 7:28pm On Jun 02, 2018 |
awesomeJ:Thanks boss, can in get this at the banks? |
Re: Bonds Investors Hub by awesomeJ(m): 9:03pm On Jun 02, 2018 |
spenca:Thanks sir. So which one is often quoted for bonds? the yield to maturity or the coupon yield? I'm thinking it's the yield to maturity. is it? |
Re: Bonds Investors Hub by awesomeJ(m): 9:04pm On Jun 02, 2018 |
GODAKPAN:As soon as I get through to zenith or FBN, I'll give updates. |
Re: Bonds Investors Hub by spenca: 6:13am On Jun 03, 2018 |
awesomeJ: The issuer of the bond beliefs that at first issuance you will hold to maturity hence the current yield will be what the coupon offers. But at the level of the secondary market YTM will either have upside or downside, this is due to the fact that bonds will either be selling for a premium or a discount this affects the yield as most will not be sold at par value. If you have a bond in your portfolio and you want to know your current yield just use the formulae I gave earlier but in cases of the exchanges the mostly will quote YTM based on the belief aforementioned |
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