NTMA's 15 year bond

Gonzales

Checked out the NTMA site but it's hard to read as a layman, can anyone on here explain in plain english how these work?
thx.

pocketdooz

Gonzales wrote: »

Checked out the NTMA site but it's hard to read as a layman, can anyone on here explain in plain english how these work?
thx.

The government issued a 15 year bond that matures 15 years from now.

Every year they pay a spread over a certain rate. At the moment that stands at a total cash pay by the government of 5.44% per annum.

In 15 years you *hopefully* get your money back from the government.

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Gonzales

pocketdooz wrote: »

The government issued a 15 year bond that matures 15 years from now.

Every year they pay a spread over a certain rate. At the moment that stands at a total cash pay by the government of 5.44% per annum.

In 15 years you *hopefully* get your money back from the government.

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thanks for that, so no guarantees on capital then.

pocketdooz

Gonzales wrote: »

thanks for that, so no guarantees on capital then.

No, unfortunately not. Government bonds are supposedly relatively risk-free and to be honest, I think 5.44% is a pretty decent yield on a government bond but when your time horizon stretches out to 2024 who knows what risks lie ahead for this country.

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lucky-colm

pocketdooz wrote: »

No, unfortunately not. Government bonds are supposedly relatively risk-free and to be honest, I think 5.44% is a pretty decent yield on a government bond but when your time horizon stretches out to 2024 who knows what risks lie ahead for this country.

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still you'd have to say its about as gauranteed as you can get without actually getting capital gaurantee imo:D

pocketdooz

lucky-colm wrote: »

still you'd have to say its about as gauranteed as you can get without actually getting capital gaurantee imo:D

In what way?

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Bobby1984

Its as close to being guaranteed without being guaranteed because if in 15 years time the govt cant afford to pay you back your capital then the country is $crewed.

Your investment would be the least of the countries worries

38141

If its the govt that is guarranteeing your money on deposit a/c in irish bank, then identical risk, just higher return with govt bond ;-)

kowloon

Which broker would be the best to go with?

Bobby1984

38141 wrote: »

If its the govt that is guarranteeing your money on deposit a/c in irish bank, then identical risk, just higher return with govt bond ;-)

The major difference though is access to the funds. If you have money on deposit in any bank, it is locked in for a much shorter time than if you buy the bonds. If an emergency occurs which means you need access to cash it is usually possible to withdraw money from deposit accounts but you may incur some penalties.

The bond however would be a good way of saving for the long term though. Without reading much of the information about the bonds it appears that they are traded on the ISEQ so it would be possible to liquidate before 15 years if the situation arose

38141

These generally are not accessible to penny pinching retail investors