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Carry Investment

  • 01-12-2010 3:35am
    #1
    Iguana Bob
    Closed Accounts Posts: 208 ✭✭


    if a country is doing badly do its intrest rates on loans drop and visa versa. ireland presumably will be in this case for the foreseeable future at least a few years. so if i was to borrow money from a credit union or bank in ireland what kind of rate would i get.
    i could then use this money and lodge it in an account that i have in brazil and pocket the difference in the intrest rate or use it to pay off the loan without costing me anything. obviously if ireland magically enters another boom id be screwed but is this about the jist of it. im presently in brazil and intrest rates are pretty high


Comments

  • #2
    RoadKillTs
    Closed Accounts Posts: 1,710 ✭✭✭RoadKillTs


    if a country is doing badly do its intrest rates on loans drop and visa versa.

    Nope.

    Look at what BOI are charging on unsecured loans :eek:

    Link

    And Ulsterbank


  • #3
    Iguana Bob
    Closed Accounts Posts: 208 ✭✭Iguana Bob


    yea my expert opinion says thats wouldnt be a good investment
    any body got any useful links, lust looking for some good research, was reading this but it seems a bit basic


  • #4
    whysomoody
    Registered Users, Registered Users 2 Posts: 226 ✭✭whysomoody


    Iguana Bob wrote: »
    yea my expert opinion says thats wouldnt be a good investment
    any body got any useful links, lust looking for some good research, was reading this but it seems a bit basic

    Don't forget about the currency changes as well though!

    Google Japanese Carry trade and you will find lots of info on it.


  • #5
    Iguana Bob
    Closed Accounts Posts: 208 ✭✭Iguana Bob


    whysomoody wrote: »
    Don't forget about the currency changes as well though!

    Google Japanese Carry trade and you will find lots of info on it.

    yea that what i was lookin at, seems risky to say the least. think ill just move all the money i have in aib to a brazil bank at least ill get a better rate of intrest till i do some more research


  • #6
    Joe Schmo
    Registered Users, Registered Users 2 Posts: 63 ✭✭Joe Schmo


    countries like Brazil that pay high rates often pay a lower (but still very high) rate for USD. You could look at getting a USD loan from aib. Their offshore banking unit often does foreign currency loans. A loan denominated in the same currency obviously mitigates fx risk in the cheapest way possible.

    Alternatively you could hedge using futures in a brokerage account, but that would expose you in event of early retirement of the debt.

    I would say go for it. This type of carry investment has been around for years. So long as the loan bank does not penalize early payment I can't see many risks.


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  • #7
    gonedrinking
    Closed Accounts Posts: 810 ✭✭✭gonedrinking


    What rate of interest are you getting in Brazil OP? I'm getting 6% interest on a 1 year term deposit account in Australia, its awesome.


  • #8
    Iguana Bob
    Closed Accounts Posts: 208 ✭✭Iguana Bob


    gonedrinking wrote: »
    What rate of interest are you getting in Brazil OP? I'm getting 6% interest on a 1 year term deposit account in Australia, its awesome.

    ill have to check tomorrow. in a couple of the banks for fixed term deposit accounts
    Joe Schmo wrote: »
    countries like Brazil that pay high rates often pay a lower (but still very high) rate for USD. You could look at getting a USD loan from aib. Their offshore banking unit often does foreign currency loans. A loan denominated in the same currency obviously mitigates fx risk in the cheapest way possible.

    Alternatively you could hedge using futures in a brokerage account, but that would expose you in event of early retirement of the debt.

    I would say go for it. This type of carry investment has been around for years. So long as the loan bank does not penalize early payment I can't see many risks.

    the loan rate from aib is prett high thoe, like 11%. that doesnt make much sense, im pretty sure the deposit rate wont be higher than that. is there any way of getting a lower loan rate for something like 100k


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