german goverment bonds

irishh_bob

ok , appologies to the moderator if im sailing close to the wind as regards opening several similar themed threads

like many people im banned from askaboutmoney so i could not reply to a thread which provided a link to a site with information on buying german goverment bonds , this site was entirely in german

has anyone got any links to similar sites in english

thanks

Goodluck2me

what would you like to find out?

irishh_bob

Goodluck2me wrote: »

what would you like to find out?

they seem like a good place for a cash lump sum , somone close to me has a large sum of money they would like to put away for a short few years , thier only ambition is security

Jim2007

Here is the German government site on bonds and related securities. The site covers full detail on who to open an account and so on.

Good luck with that,

Jim

OfflerCrocGod

Is this to be held to maturity? i.e. for 10 years? If so I'd buy Irish bonds instead, the return is far greater and just as safe (especially considering a haircut is already priced into them).

Honestly they are a great investment for a hold-to-maturity investor.

pocketdooz

OfflerCrocGod wrote: »

Is this to be held to maturity? i.e. for 10 years? If so I'd buy Irish bonds instead, the return is far greater and just as safe (especially considering a haircut is already priced into them).

Honestly they are a great investment for a hold-to-maturity investor.

In the realm of bad advice, this has to be up there with the worst of it.

.

mono627

OfflerCrocGod wrote: »

Is this to be held to maturity? i.e. for 10 years? If so I'd buy Irish bonds instead, the return is far greater and just as safe (especially considering a haircut is already priced into them).

Honestly they are a great investment for a hold-to-maturity investor.

Really? Do you know how bond yields work? You genuinely think there is no way we could default on our bonds at all?

OfflerCrocGod

pocketdooz wrote: »

In the realm of bad advice, this has to be up there with the worst of it.

I said Irish bonds not Greek bonds. It doesn't matter how bad things are in the country what matters is what is coming into the country from exports that's what decides if Ireland will pay it's bonds. However Ireland pays its bonds doesn't matter if it's using EU Commission money or it's own, immaterial, what matters is that it pays.

I do know how bond yields work mono627, do you? When Irish bonds yield over 9% there already is a large haircut priced in, do you realize that? I meant buying them in the market right now not new issues.

pocketdooz

OfflerCrocGod wrote: »

I said Irish bonds not Greek bonds. It doesn't matter how bad things are in the country what matters is what is coming into the country from exports that's what decides if Ireland will pay it's bonds. However Ireland pays its bonds doesn't matter if it's using EU Commission money or it's own, immaterial, what matters is that it pays.

I do know how bond yields work mono627, do you? When Irish bonds yield over 9% there already is a large haircut priced in, do you realize that? I meant buying them in the market right now not new issues.

It's clear from these points that you havent a clue what you're talking about when it comes to bonds.

.

irishh_bob

OfflerCrocGod wrote: »

Is this to be held to maturity? i.e. for 10 years? If so I'd buy Irish bonds instead, the return is far greater and just as safe (especially considering a haircut is already priced into them).

Honestly they are a great investment for a hold-to-maturity investor.

good question and as far as i know the answer is NO , this person ( my mum ) only wants to put away money for around three years , excuse my ignorance but are the only form of goverment bonds , ten year ???

OfflerCrocGod

pocketdooz wrote: »

It's clear from these points that you havent a clue what you're talking about when it comes to bonds.

.

Explain.

pocketdooz

OfflerCrocGod wrote: »

Explain.

"It doesn't matter how bad things are in the country what matters is what is coming into the country from exports that's what decides if Ireland will pay it's bonds."

"However Ireland pays its bonds doesn't matter if it's using EU Commission money or it's own, immaterial, what matters is that it pays."

"If so I'd buy Irish bonds instead, the return is far greater and just as safe (especially considering a haircut is already priced into them). "

"Honestly they are a great investment for a hold-to-maturity investor. "

"When Irish bonds yield over 9% there already is a large haircut priced in, do you realize that?"

"I meant buying them in the market right now not new issues."

......

All the above are ridicuous statements that don't make any sense (and are not true).

.

OfflerCrocGod

pocketdooz wrote: »

When Irish bonds yield over 9% there already is a large haircut priced in, do you realize that?

All the above are ridicuous statements that don't make any sense (and are not true).

.

Explain how my statement is wrong. With maths, not with ad hominem attacks.

pocketdooz

OfflerCrocGod wrote: »

Explain how my statement is wrong. With maths, not with ad hominem attacks.

None of your points make sense, I don't have time now to go through them all.

.

OfflerCrocGod

pocketdooz wrote: »

None of your points make sense, I don't have time now to go through them all.

.

Says it all really. The maths for bonds is not that difficult it takes very little time.

pocketdooz

OfflerCrocGod wrote: »

Says it all really. The maths for bonds is not that difficult it takes very little time.

Thanks for telling me. I work as a bond investor.

.

OfflerCrocGod

pocketdooz wrote: »

Thanks for telling me. I work as a bond investor.

.

So explain to me how the high yields don't already price in a haircut?
Christ I would not want to use your services that's for sure. Lots of time to post messages here but no time to explain the maths and how I'm wrong though.

pocketdooz

OfflerCrocGod wrote: »

So explain to me how the high yields don't already price in a haircut?
Christ I would not want to use your services that's for sure. Lots of time to post messages here but no time to explain the maths and how I'm wrong though.

A haircut? A haircut is when bond investors don't get paid back at par, I assume what you're trying to refer to is a discount?

None of which changes the fact that you said the following three things which are proposterous:

1) What matters is what is coming into the country from Exports that's what decides if Ireland will pay its bonds,

2) Irish bonds are just as safe as German bonds when held to maturity (despite the fact that the bond market is charging a 700bp premium),

3) Irish bonds are a great investment for a hold-to-maturity investor.

.

OfflerCrocGod

pocketdooz wrote: »

A haircut? A haircut is when bond investors don't get paid back at par, I assume what you're trying to refer to is a discount?

Which means a haircut is already priced in. All that is priced into the discount, hence discount not premium!

pocketdooz wrote: »

None of which changes the fact that you said the following three things which are proposterous:

1) What matters is what is coming into the country from Exports that's what decides if Ireland will pay its bonds,

No country in history has defaulted when running a positive balance of payments.

pocketdooz wrote: »

2) Irish bonds are just as safe as German bonds when held to maturity (despite the fact that the bond market is charging a 700bp premium),

AHAAHAHA, the rational market right?
The rational market that sold BARC at 60p, RBS at 30p LLOY at 50p and a host of house builders at basically nothing at all? If the market was rational and correct then Warren Buffet would be a far poorer man.

pocketdooz wrote: »

3) Irish bonds are a great investment for a hold-to-maturity investor.

.

We'll see in a few years I guess.

soddy1979

I'm going to sit on the fence for the moment when deciding these bonds are currently good value. However, OfflerCrocGod does raise an interesting point as to when do Irish bonds start to represent good value. He/she seems to base their assumption of value on the idea that the Government does not default, and EMU doesn't inflate its way out of these sovereign crises - which I think are both questionable.

I can see two scenarios where they will not represent good value at a current yield differential to German bunds:

1) If the Irish Government end up restructuring their obligations
2) If inflation ends up destroying a portion of the value of the bond over it's life - however this will effect all non-index linked bond investments.

So, if Ireland end up taking a bail out from the IMF and/or EFSF, will this result in a restructuring of our debt obligations? I'm not up to speed on this so I'd love to hear thoughts.

What are the alternatives to accepting a bailout? The only ones I can see is severe fiscal austerity, which this government doesn't seem capable of delivering - or else we leave the Euro and print our way out of the obligations, which will lead us from a restructure to a destruction of wealth through inflation.

OfflerCrocGod

soddy1979 wrote: »

1) If the Irish Government end up restructuring their obligations

Even if they restructure if they are trading at a yield which already prices in a large haircut and the haircut is less then that they may still present good value. So if the haircut is 40% and they are trading at a 55%-60% haircut the bond will be good value.

soddy1979 wrote: »

2) If inflation ends up destroying a portion of the value of the bond over it's life - however this will effect all non-index linked bond investments.

As you've said all bonds are affected by this.

soddy1979 wrote: »

So, if Ireland end up taking a bail out from the IMF and/or EFSF, will this result in a restructuring of our debt obligations? I'm not up to speed on this so I'd love to hear thoughts.

The IMF do not operate on the assumption of haircuts and I doubt Germany/France will want their banks to lose billions - they will have to bail them out then.

soddy1979 wrote: »

What are the alternatives to accepting a bailout? The only ones I can see is severe fiscal austerity, which this government doesn't seem capable of delivering - or else we leave the Euro and print our way out of the obligations, which will lead us from a restructure to a destruction of wealth through inflation.

There's still time to play doing nothing is probably the least worse option. Especially if the pension fund is brought into play. Ideally though the Croke Park agreement would be scrapped while it will hurt it will hurt far less then the IMF.

soddy1979

OfflerCrocGod wrote: »

Even if they restructure if they are trading at a yield which already prices in a large haircut and the haircut is less then that they may still present good value. So if the haircut is 40% and they are trading at a 55%-60% haircut the bond will be good value.

I did a quick calculation on a spreadsheet by comparing the yields, coupons and prices for these bonds, and this tells me the haircut that will make an investor indifferent between investing in an Irish ten year and a German 10 year is about 58%. Could anyone tell me if that is correct?

Whatever the correct amount is, why do you think the market is pricing in this possible haircut by too much?

Économiste Monétaire

OfflerCrocGod wrote: »

No country in history has defaulted when running a positive balance of payments.

No country has every run a positive BoP, because it's impossible to do so.

OfflerCrocGod

Économiste Monétaire wrote: »

No country has every run a positive BoP, because it's impossible to do so.

Sorry, surplus balance of payments.

Économiste Monétaire

OfflerCrocGod wrote: »

Sorry, surplus balance of payments.

What? The BoP is never in surplus or deficit. It's always balanced; i.e., zero.

Jim2007

irishh_bob wrote: »

good question and as far as i know the answer is NO , this person ( my mum ) only wants to put away money for around three years , excuse my ignorance but are the only form of goverment bonds , ten year ???

The basic tenant for investing is a reasonable time frame, usually about 5 years, so bonds of any time will not meet your requirements!

So basically you're looking at placing the money on deposit somewhere or buying some money market products, but be warned money market products go down as well as up!

Good luck with that,

Jim.

Goodluck2me

irishh_bob wrote: »

they seem like a good place for a cash lump sum , somone close to me has a large sum of money they would like to put away for a short few years , thier only ambition is security

One piece of advice I will give you is to try to buy the German bond as close to after the payment of the coupon date as possible, as they are treated slightly penally for tax purposes. i.e. if the coupon is paid on the 1st, you should buy on the second, as that way your accrued interest is much lower and it is more efficient for tax purposes.

You will end up paying extra tax owing to the accrued interest.

Also, as a buy to hold investor for ten years, you needn't buy a ten year bond. If you take the view interest rates will rise in a number of years, you may get better value with two five year bonds for instance - I'm am not saying this is necessarily what you should do; just giving you the optoin, but you have less of a reinvestment risk as the yields are so low with the Bunds at the moment.

Caveat emptor

OfflerCrocGod

Économiste Monétaire wrote: »

What? The BoP is never in surplus or deficit. It's always balanced; i.e., zero.

"In economic terms, a balance of payments surplus means a nation has more funds from trade and investments coming in than it pays out to other countries"

It's balanced as far as on the other side of the ledger we have large national savings (current savings rates are high atm in Ireland). The other alternative is to have loans/debts to other countries.

I hesitate to bring this up because I'm sure on this forum these figures will be spat upon but Eurostat released latest Eurozone surplus figures today.

"
Concerning the total trade of Member States, the largest surplus was observed in Germany (+96.7 bn euro in
January-August 2010), followed by Ireland (+27.8 bn), the Netherlands (+25.1 bn) and Belgium (+10.7 bn). The
United Kingdom (-74.1 bn) registered the largest deficit, followed by France (-40.1 bn), Spain (-34.6 bn), Greece
(-15.6 bn), Italy (-15.5 bn) and Portugal (-13.0 bn).
"

The only country in the EU (not just Eurozone) with a larger positive trade balance (up to September) then Ireland is Germany. Ireland 4Million, Germany, 80Million people. Look at the other PIIGS, we're not like them.

Économiste Monétaire

Um, this:

"In economic terms, a balance of payments surplus means a nation has more funds from trade and investments coming in than it pays out to other countries"

is a current account surplus, not a "surplus balance of payments." The balance of payments is never in surplus, it's not a disputable issue in economics, it's a simple fact of accounting. By construction, the sub-components of the BoP must add to zero, so there can be no overall surplus or deficit, which is what you said above. What you've linked to on Eurostat is a sub-component of the current account: the balance of trade.

BoP = Current Account + Capital Account + Financial Account + Financial Derivatives & Discrepancy = 0.

A simple example for the U.S. 2009 BoP:

(2,159,000 - 2412489 -124943) + (-140) + (-140,465 + 305,736) + (50,804 + 162,497) = 0.

Ireland 2008:

(-10,169) + (47) + (16,132) + (-6,010) = 0.

Any international macro textbook will confirm that you can't have a BoP surplus/deficit, I have no idea where you got that definition from.

Jim2007

Goodluck2me wrote: »

One piece of advice I will give you is to try to buy the German bond as close to after the payment of the coupon date as possible, as they are treated slightly penally for tax purposes. i.e. if the coupon is paid on the 1st, you should buy on the second, as that way your accrued interest is much lower and it is more efficient for tax purposes.

You will end up paying extra tax owing to the accrued interest.

Also, as a buy to hold investor for ten years, you needn't buy a ten year bond. If you take the view interest rates will rise in a number of years, you may get better value with two five year bonds for instance - I'm am not saying this is necessarily what you should do; just giving you the optoin, but you have less of a reinvestment risk as the yields are so low with the Bunds at the moment.

Caveat emptor

The OP is seeking a safe place for a large sum of money for a short period (3 years, I think). Please enlighten us on how this advice will match that requirement

Jim.

Goodluck2me

irishh_bob wrote: »

ok , appologies to the moderator if im sailing close to the wind as regards opening several similar themed threads

like many people im banned from askaboutmoney so i could not reply to a thread which provided a link to a site with information on buying german goverment bonds , this site was entirely in german

has anyone got any links to similar sites in english

thanks

Jim2007 wrote: »

The OP is seeking a safe place for a large sum of money for a short period (3 years, I think). Please enlighten us on how this advice will match that requirement

Jim.

Did you quote the wrong reply?He asked about German bonds?

German bonds, regardless of length of time can be sold through the secondary market and have a very low risk of default therefore are have little default risk. They have a an active presence in the secondary market, so little liquidity risk, they trade in Euro so no currency risk and their interest rate is already pretty low, without too much chance of a decrease so again little reinvestment risk - can you explain why you asked the above? I am confused?

OfflerCrocGod

Économiste Monétaire wrote: »

Um, this:

is a current account surplus, not a "surplus balance of payments." The balance of payments is never in surplus, it's not a disputable issue in economics, it's a simple fact of accounting.

I'm not saying it doesn't balance using double entry accounting. Neither are the definitions I'm giving. I'm saying you can make it balance with positive or negative attributes. As I said before.

It's balanced as far as on the other side of the ledger we have large national savings (current savings rates are high atm in Ireland). The other alternative is to have loans/debts to other countries.

Either of the two balance the BoP to 0, totally correct I won't disagree about that. I'm talking about what we put on the other side of the ledger to balance it. Loans/Debt is negative, savings positive.

Jim2007

Goodluck2me wrote: »

Did you quote the wrong reply?He asked about German bonds?

No follow up post from OP indicated 3 for his mother I think it was....

Goodluck2me wrote: »

German bonds, regardless of length of time can be sold through the secondary market and have a very low risk of default therefore are have little default risk. They have a an active presence in the secondary market, so little liquidity risk, they trade in Euro so no currency risk and their interest rate is already pretty low, without too much chance of a decrease so again little reinvestment risk - can you explain why you asked the above? I am confused?

For a 3 year time span, a 10 year bond is not what a prudent advisor would recommend - the OP can't hold to maturity and since time will not be his friend, he may be forced to sell at loss in the short term, thus although not without risk a money market product would be a better choice.

Jim.

Goodluck2me

Jim2007 wrote: »

For a 3 year time span, a 10 year bond is not what a prudent advisor would recommend - the OP can't hold to maturity and since time will not be his friend, he may be forced to sell at loss in the short term, thus although not without risk a money market product would be a better choice.

Jim.

FYI I didnt advocate a ten year bond, I just explained that if he were to go that route he might be better going with two 5 years, and when, in relation to the coupon, may be most efficient.

Also see my point if income is not an issue and capital protection is then a flight to safety i.e German bonds are recommended. The time frame he chooses is up to him, I personally wouldn't go with the ten year either.

Become

irishh_bob wrote: »

they seem like a good place for a cash lump sum , somone close to me has a large sum of money they would like to put away for a short few years , thier only ambition is security

Doesn't the german bond website also have shorter term options of 1 & 2 year duration on offer, "Finanzierungsschätze" or treasury bills I'd imagine they're called?