Understanding Bonds

  • Weekly Giveaway for our active users. N50,000 per Week. Do you want to contribute to this community? We are looking for contribution? What is hot right now? Sign up and get in on the ground floor of the newest, fastest growing Nigerian forum!

Adewale Stock

Administrator
Apr 15, 2020
1,228
79
48
32
.
Bonds are debt instruments also called fixed-income securities, which represent a loan obligation issued by the government, or an organization (company), or an individual in order to raise money.

.
The investor lends funds to the bond issuer in exchange for regular interest payments (known as coupon) over a specified period (known as tenor).

Tenor typically range from 2-30 years, depending on the bond issue.

.
The investor receives regular interest income paid semi-annually (or quarterly, as is the case of the Federal Government of Nigeria Savings Bond, FGNSB launched in 2017).

.
At the end of the tenor or maturity period, the borrower (bond issuer) pays back the money loaned in full to the investor (bondholder).

.
Example
........................................................................................
A 2/3 year maiden edition of the FGNSB was issued for a minimum subscription of N5,000, and subsequently in multiples of N1,000 at a 13.01% annual coupon rate paid quarterly.
.........................................................................................
(Note that these rates can fluctuate. Also, different tenors can have their respective rates.)

.
What this means is that if you have, say, N50,000 in a savings account that you will not need urgently. Instead of tying down the money in your bank savings account, you could subscribe to the bond issue for 2 or 3 years, and then get N1,626.25 credited into your account quarterly (every three months) till the maturity date.

.
There are different types of bonds you may hear about in the markets. They including:

(a.) Corporate bonds—issued by companies

(b.) Municipal bonds—issued by a State Government

(c.) Treasury bonds—varieties of bonds issued by the FGN. E.g. …the Green bond, euro bond, Diaspora bond, and Savings bond.

.
You can always sell your bond holdings on the Exchange if you happen to need the money earlier than you planned for.

.
You can, for example, buy long-term bonds, hold
them and collect interest payments for several years, and then sell them when their market value increases, or whenever the need arises.

.
©ulled from: Cracking the Stock Market Code...by Amah Lambert
 

Machine

New Member
Sep 7, 2020
1
0
1
28
Pls what are the step by step method for bying this bonds and t-bills for a novice and asumming I want to start with #10k.