TotoNaRubber:
Thanks for the explanation, what I understand is that the new buyer will pay more to obtain the bond and then still earn less in Interest payments, at the end of the day, the real interest payments for a two year bond could be 10.5%.

What do you think?

emmanuelewumi:


The new buyer will get a true yield of about 12%, which you quoted earlier.

Etfash:


I apologize for this digression please. What happens to share price of a multinational organization like NESTLE should the Naira be devalued?

ogawisdom:
TB should be reduced to 1 to 2% to force investors to invest in business to create jobs for our economy.

Someone with 50m is hiding in TB for easy money instead of going into real sector. Bad for our economy

emmanuelewumi:

hor=CsRockefeller post=84110638]Lovely thread.

U think the first time I came here was a year ago when my sister was looking to invest in TB, I didn't stay long as she wasn't too interested.

As an Economist, I have no problem with people doing portfolio investment, it's part of one of the concept in Economics called "choice" consumers have that right/privilege.

That said, TB, Bonds and all the instruments of the money and capital market are important to the Government as a source of funding the budget, though, in my opinion, very unnecessary.

The Government of Late Yaradua saved about 90billion dollars in foreign reserves, what was it used for? The current administration and previous have used these instruments as a means of budget funding more than their primary purpose of controlling inflation, especially with the TB.

To those who say that Government should crash the rates have salient points to say so, did see the analysis of the recent auction? All three rates were oversubscribed by over 50%, that's a whole lot of idle cash. Let's we forget, as Government continues on this trend, our domestic debt profile continues to look bad, not to leave out the Banks and other Financial institutions who now see the CBN as a cash cow and have neglected their primary duty of receiving deposit, paying cash and lending to the real sector.

Nevertheless, I love the arguments for and against, it's good for a future CBN Governor or Finance Minister to have an open mind and sway a little bit to the left and a little bit to the right.

For those outside the country, we appreciate your contributions in the form of remittances, infact, it's these remittances that has kept consumer spending going and has reduced the level of frustration in the system, believe me, things are really bad back home.

In as much as you all want a safe investment, I plead, please, channel some funds to the start ups of your brother's, nephews, cousins, friends back home, no matter how small. There are no accessible loans, no jobs, how man go survive? Some young entrepreneurs need as little as a 100k to start something.

The fact is Governance is on leave on Nigeria, so who will fight for the poor, the weak, the hungry, the downtrodden, the sick? Who will give them a platform to stand so that they can move the world? Definitely not the Government.

I wish you all well.


Our youths need to work on their attitudes and their expectations about life.

I once gave a so called young enterpreneur in my area N40,000 (dash), when he requested for a loan of 100k.
I later found out that he used the money for sport betting.

We need to learn how to delay gratification, nothing good comes easily, we need to have long term plan, learn to live below our means and try to see the bright side of life.

While some of us are complaining about Nigeria, some are legally making money from the same Nigeria.

As a man thinketh so he is.

odimbannamdi:


Bros, is it your money?

emmanuelewumi:


Nothing, Nestle is one of the defensive stocks that can be used as an hedge against devaluation and inflation. This is a company that has continously maintained a double digit profit growth.

We have infrastructural and housing deficits in Nigeria, if you are a resident of Lagos you will find out that cements are now used for road constructions in the state because of their durability.

The market leader in that sector is Dangote cement followed by Lafarge, the future is very bright for players in that sector. We now enjoy self sufficiency in cement production to the extent that we now export to other countries in Africa.

DaBogu:

I agree with you. My mates are either with their boyfriend or clubbing. I have been a big fan of your right from your write up using the other monicker. It been tough especially with our generation, they are either doing unproductive things that add little value to them. I have not gotten to where I want to be but am working really hard ensure I get there.

I saved during NYSC, did odd jobs. Thank you for your input. I will update you as regards the mutual fund. Thank you once again.

emmanuelewumi:


Thanks for the kind words. The Lord shall grant you all your heart desires, if you are genuine and you don't give up

emmanuelewumi:


The new buyer will get a true yield of about 12%, which you quoted earlier.

There are times when the secondary market buyer can a better true yield than the primary market buyer. It can happen when the price of the bond falls in the secondary market.

Popular saying on Walls street

"Bonds keep you rich, stocks make you rich".

emmanuelewumi:


Please buy money market funds or Treasury Bills.

You bought a 2 year bond and you want to sell within 3 months. Anyway there is a secondary market for bonds on FMDQ and NSE

TotoNaRubber:
I have a few questions;

1. How do you calculate the yield on bonds. Here you quoted 16.39% coupon and yield of 12.06. What does that mean?

2. Are your interests based on 16.39% or 12.06%?

3. After investing when do you start receiving coupon payments.

4. Do you need to open an account to invest in bonds?

emmanuelewumi:

quote author=ukay2 post=84116656]

Oga Emmanuelwumi. ...sorry Sir for my clarification on secondary marker of FGN Bonds

FGN Bonds are offer at a certain percentage
If 16.39% FGN BOND is offer at 12% in secondary market
What it means is that the new buyer will pay more for buying the bond today.....like paying 3M for a bond of 2.7M.

The new buyer will enjoy the coupon payments of 16.39% until the maturity of the bond....and a repayment of the 3M if he/she holds the bond till maturity.

The new buyer may loose some money if he/she sells the bond at a higher offer price like 13% but may even gain some money if he can sell the bond at 10%.

You will only understand secondary market bond if you invest or trade it

Most FGN BONDS even is primary auction price are sold below the coupon percentages -meaning the primary buyers of the primary auction also paid more for the bond they are selling to you today,.

I hope my little explanations make sense a bit.

Other bonds ogas and gurus can educate us more

Thanks



Thank you very much

emmanuelewumi:



Very good, you paid N20 million because you bought from the secondary market.

You will need about N100 million to buy FGN bond from the primary market.

With a minimum of $2500 you can also invest in the Eurobond fund of FBN Quest Merchant Bank @ 6%.

You are sure of the preservation of your fund from currency devaluation

needful:


You are right sir. Since I invested more than 20m, my average yearly coupon payment will be between 4.5 to 5m and I planned converting them back to dollars to add to my dollar investment. I have been doing it with TB until this crash and I also have zenith and gtb stock. U adviced me about this sometime ago and I followed your advice and bought those shares.
Thank you for your selfless advice. Unfortunately, its a faceless forum

God will multiply your blessings in 1trillion.

emmanuelewumi:



Very good, you paid N20 million because you bought from the secondary market.

You will need about N100 million to buy FGN bond from the primary market.

With a minimum of $2500 you can also invest in the Eurobond fund of FBN Quest Merchant Bank @ 6%.

You are sure of the preservation of your fund from currency devaluation

emmanuelewumi:



Very good, you paid N20 million because you bought from the secondary market.

You will need about N100 million to buy FGN bond from the primary market.

With a minimum of $2500 you can also invest in the Eurobond fund of FBN Quest Merchant Bank @ 6%.

You are sure of the preservation of your fund from currency devaluation

emmanuelewumi:


Really, I am impressed that you bought those stocks.

Nigerian banks have mastered the art and science of making money in Nigeria, no matter the direction of the economy.

zohan101:

Thanks alot Sir for your input on this thread.I very much appreciate it..

Please can I walk into Say First bank and request to invest in FGN bond(secondary market) just like we do for treasury bills??

Thinking of going long with FGN bonds now that TB is not looking attractive..Thanks again

needful:


Yes I did. Am really very proud of you sir. Abeg, if for any reason, u are within Canada, pls sir alert me.

emmanuelewumi:


I will advise you spread the money between bonds, Treasury Bills, money market funds and Eurobond.
We are not sure of the future of the Naira in 2 years time.

If you are like me I will also consider investing in stocks like Nestle, Dangote cement, Zenith and GTB.

N1 million invested in GTB in 2000 is now worth over N100 million, the dividend received in 2018 is 10 times the amount invested.

TotoNaRubber:
Thanks for the explanation, what I understand is that the new buyer will pay more to obtain the bond and then still earn less in Interest payments, at the end of the day, the real interest payments for a two year bond could be 10.5%.

What do you think?

Jejebabaa:


Sir, if you dont mind can you do the analysis because i am arriving at around 30 million naira for an initial investment of 1 million naira in 2000 (guess GTB was sold for 5 naira during that IPO which gave around 200k units then, then they declared bonuses and dividends).
Thanks.

emmanuelewumi:



1 for 1 bonus 1993

1 for 1 bonus 1995

3 for 2 bonus 1997

1 for 2 bonus 1998.

,,,,..............

Initial public offer

1 for 4 bonus 2002

1 for 5 bonus 2003

1 for 3 bonus 2004

1 for 3 bonus 2006

1 for 4 bonus 2007

1 for 10 bonus 2008 March

1 for 4 bonus 2008 December

1 for 4 bonus 2009

1 for 4 bonus 2010

emmanuelewumi:



1 for 1 bonus 1993

1 for 1 bonus 1995

3 for 2 bonus 1997

1 for 2 bonus 1998.

,,,,..............

Initial public offer

1 for 4 bonus 2002

1 for 5 bonus 2003

1 for 3 bonus 2004

1 for 3 bonus 2006

1 for 4 bonus 2007

1 for 10 bonus 2008 March

1 for 4 bonus 2008 December

1 for 4 bonus 2009

1 for 4 bonus 2010

katamo:


I can speak to the coupon versus yield question. If my explanation below is difficult to follow, the short answer is that the number you should be looking at and using to compare with other investment opportunities at is the yield.

When a bond is issued, there is a coupon rate associated with it (in this case 16.39%). If the bond is issued at par (N1,000), then what this means that the bond investor will pay N1,000 and every year he/she will get N163.9 in interest payments (typically paid out every 6 months, so N81.95). When a bond is issued at par, the coupon rate equals the yield so an investor who holds this bond until maturity will earn a yield of 16.39% in this case.

Things start getting trick when the initial investor decides to sell the bond in the secondary market. In this case, let's assume that the investor bought a 5-year bond and has held it for 3 years but wants to sell. The new buyer will therefore receive 2 years of interest payments and the return of the bond principal (N1,000 invested by the initial owner).

In this situation, the bond is being sold at a yield of 12.03%. Since the yield is lower than then coupon, that means that interest rates have decreased compared to when the bond was issued. Therefore the new bond buyer will need to pay more money (above par) for a bond that pays out 16.39% interest because the interest rate today is only 12.03%. If you do the math, what this means is that the buyer will pay about N1,073 for every N1,000 par value of bond to earn a yield of 12.03%. He/she will then receive 2 years of interest payments (N81.95 every 6 months) and the return of the original face value of the bond (N1,000).

ukay2:


Good old days. .....Sir why no bonuses nowadays?

emmanuelewumi:
I think people here are more concerned about the return of their capital than returns on their capital, that is what suits their investment temperament and they can't be blamed for that.

Everyone to what works for him or her.

emmanuelewumi:



1 for 1 bonus 1993

1 for 1 bonus 1995

3 for 2 bonus 1997

1 for 2 bonus 1998.

,,,,..............

Initial public offer

1 for 4 bonus 2002

1 for 5 bonus 2003

1 for 3 bonus 2004

1 for 3 bonus 2006

1 for 4 bonus 2007

1 for 10 bonus 2008 March

1 for 4 bonus 2008 December

1 for 4 bonus 2009

1 for 4 bonus 2010

emmanuelewumi:


Sorry


1000 units bought at N5000 in 2001, would have grown to 7157 units valued at over N200,000 in 2019.

Although GTB is currently undervalued at the current price of N28 per share.


Thanks at Jejebaba for the correction


Although 1000 units invested by early investor in 1993 would have grown to over 100,000 units in 2019

odimbannamdi:


Bros, is it your money?