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9yr CBK Kenya Infrastructure Bond
Scubidu
#21 Posted : Monday, August 23, 2010 2:00:02 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
@wanyuru. How does one calculate the life of bond given the amortized payments? Is there some sort of formula? It's seems to reduce the risk on the bond, non?
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
kizee
#22 Posted : Monday, August 23, 2010 2:03:17 PM
Rank: Member


Joined: 1/9/2008
Posts: 537
Scubidu wrote:
@wanyuru. How does one calculate the life of bond given the amortized payments? Is there some sort of formula? It's seems to reduce the risk on the bond, non?



isnt the life of a bond fixed at issue?
Scubidu
#23 Posted : Monday, August 23, 2010 2:57:46 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
@kizee. I have no idea. I just don't understand this stuff. I'm trying to understand what his/her post meant. People said that KenGen PIBO had an effective tenor of 6.25. I don't know how they calculate that.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
kizee
#24 Posted : Monday, August 23, 2010 3:03:11 PM
Rank: Member


Joined: 1/9/2008
Posts: 537
Scubidu wrote:
@kizee. I have no idea. I just don't understand this stuff. I'm trying to understand what his/her post meant. People said that KenGen PIBO had an effective tenor of 6.25. I don't know how they calculate that.


oh yes...the kengen bond had an effective tenor due to the callable nature of the bond...unless im mistaken my FI knowledge is very rusty
Scooby
#25 Posted : Tuesday, August 24, 2010 4:44:12 PM
Rank: Member


Joined: 9/2/2006
Posts: 121
@ maka, I know what you are thinking when comparing the yield for a 30 year US treasury note and the 25 year treasury bond. To make your analysis more meaningful, please incorporate the yield spread (on account of credit ratings) between the two countries. You will be surprised that Kenyan bonds might be more expensive.

@muganda, I always have a hard time believing that the fund managers in Kenya have my best interest in mind when they make their investment decisions. To them, whether the fund gains or looses, they will make money from me.

@selah, when the government issues a treasury paper, it will reduce the amount of money circulating in the economy. CBK hopes that with less money floating around in the economy, there is a limited chance that prices for major commodities will not go up. In reality, that's not the case...which could make you confused with their comments
Scooby
#26 Posted : Tuesday, August 24, 2010 4:50:39 PM
Rank: Member


Joined: 9/2/2006
Posts: 121
Scubidu wrote:
@kizee. I have no idea. I just don't understand this stuff. I'm trying to understand what his/her post meant. People said that KenGen PIBO had an effective tenor of 6.25. I don't know how they calculate that.


Hi guys, in a nutshell, the 6.25 years is either effective or modified duration of the bond (am not sure of which one it is right now). To come up with the duration, one has to factor in the interest payments over the life of the bond.

I'll try to to post you a spreadsheet on how to come up with the amount...I dont have it with me right now.

FYI, I dont think it effective/modified should be used for bonds will call feautures. Its best suited for "normal" bonds.
bwenyenye
#27 Posted : Wednesday, August 25, 2010 5:35:43 PM
Rank: Elder


Joined: 5/24/2007
Posts: 1,805
@ Selah,

I hear you. At the end of the day, look at what brings in more coins into your pocket. There is no way you can tell me 6% is better than 12% return on profits. Hata kama ulisomea Harvard ama UON. The fact still remains 12 bob can buy me more unga than 6 bob. the rest is Hogwash! Eti oohh, the american return, base rate, inflation.... These are words for these guys create to look complicated and keep their jobs! If you look at it that simply, you will manage higher returns than those fund managers.
I Think Therefore I Am
Scubidu
#28 Posted : Wednesday, August 25, 2010 11:12:40 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
@scooby. good stuff. nice posts. luv ur name btw. If you can please send the spreadsheet to moneyedkenya at gmail dot com. Ta very much.

I remember some of the quotes by the governor in 2008. Inflation was driven by what he called short term supply side shocks (domestically) and external shocks from abroad (oil bubble). But then in 2009 he says that inflation is no longer relevant to the interest rate structure. Then 2010 he says no demand driven inflation expected especially considering how liquid banks were. His statements can be confusing cos they don't follow some on those theories people learnt in uni. Like I mentioned b4 it'll be more interesting to look at what we're importing, if we'll tackle the issue of inflation.

But the governors actions are also confusing because on the one hand he wants private sector lending to grow, but expects no demand driven inflation, how can he predict that the credit banks lend wouldn't raise prices of major commodities. His crystal ball must be good or he's secretly their hoping banks won't lend to ordinary folk (by giving them 6% on an IFRB). On the other hand he's sucking up liquidity through debt auctions and wondering why money is not circulating to people on the ground. He wants to have his cake and eat it.

so @selah, i guess u have to look at the conditions on the ground, at your local supermarket, to see how every good u buy will be affected in real terms, because you'll be as confused as I am with all the talk of money supply and inflation fundamentals.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
maka
#29 Posted : Thursday, August 26, 2010 11:57:50 AM
Rank: Elder


Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
@scooby i believe Kenyan government bonds have a good credit rating the issue of defaulting isn't anywhere in the picture.
Another over subscription guys,but the governor is sending mixed signals he wants the interest rates to remain low but investors who made bids @ 9.00% for the IFB got it while many others did bid @ btwn 6.20% to 7.00% leaving disgruntled bank dealers and other investors...
Wameua secondary market
possunt quia posse videntur
Wa_ithaka
#30 Posted : Thursday, August 26, 2010 12:23:20 PM
Rank: Veteran


Joined: 1/7/2010
Posts: 1,279
Location: nbi
From total borrowiing/debt persepective, I honestly believe we are reaching the concern level
The Governor of Nyeri - 2017
maka
#31 Posted : Thursday, August 26, 2010 1:03:07 PM
Rank: Elder


Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
@wa_ithaka i agree with you i wonder why they are borrowing so much without even considering the country going forward...tutalipa na mapua.
possunt quia posse videntur
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