Investing in Irish Bonds

joseywhales

Hi,

If i want to invest in part of a short term Irish bond, how do i do it?

ei.sdraob

Check NTMA offerings here > http://www.statesavings.ie/Pages/default.aspx

joseywhales

The problem here is that they're offering me a three year savings thing at 10% interest. When I want a two year bond close to the 12.xyz%.

Is that possible?

srsly78

On the secondary market sure.

joseywhales

So where is the secondary market? To whom do I transfer funds in order to recieve a bond certificate?

Black Rock

joseywhales wrote: »

The problem here is that they're offering me a three year savings thing at 10% interest. When I want a two year bond close to the 12.xyz%.

Is that possible?

YES - you can buy Irish Government Wholesale Bonds from designated brokers. The NTMA have published a list of them at http://www.ntma.ie/Publications/2009/WhereBuyBonds.pdf

You can see a comparison of the broker fees that each charge.

You can also view the yield to maturity of each bond - rates provided by the Irish Stock Exchange as of close of business last night at the following link - http://www.ntma.ie/GovernmentBonds/Daily_Bonds_Outstanding.pdf


At close of business on Monday 30th May 2011 the 2013 Irish Government Bond is yielding 11.81% per annum while the 2014 Irish Government Bond is yielding 12.97% per annum.

In line the normal practice in the sovereign debt markets Ireland has never issued any debt with either a preferred status or a subordinated status relative to any other debt it has issued, i.e. all debt issued by Ireland ranks pari passu and enjoys identical status. Therefore the personal NTMA State Savings” products (which include Prize Bonds) rank equally with all other "wholesale" Irish Government Bonds - all are known as "sovereign debt" and enjoy the exact same level of security.


When comparing the “wholesale / institutional” Irish Government Bonds to the range NTMA State Savings™ products there are some matters of taxation and early encashment that you need to consider.

(a) Taxation
In the case of “wholesale / institutional” Irish Government Bonds there are differences in tax treatment and stock broker fees which will affect the net return on investment. The wholesale Irish Government Bonds are currently taxed at the marginal tax rate (20% or 41%), are subject to the universal social charge and may also be subject to PRSI. At the time of purchase or redemption, broker fees may apply.

The retail / personal products known as “NTMA State Savings” products provide personal savers with some products which have low tax rates and other which are tax free. There are no fees, charges or sales commissions.

(b) Early Encashment
There is a difference in the provision for early encashment.

With the personal “NTMA State Savings” products the saver may request their money back from the NTMA at any time (with 7 days notice) and the full principal amount plus any interest due will be repaid without penalty or deduction. The amount repaid will never be less than the original amount deposited. (However, Prize Bonds cannot be encashed until 3 months after purchase).

In respect of the “wholesale / institutional” Government Bonds there is no provision for early repayment by the NTMA. Accordingly, a holder of such bonds who wishes to liquidate their investment so as to obtain their funds before the redemption date can only do so by selling the bonds on the secondary market through the brokers listed at http://www.ntma.ie/Publications/2009/WhereBuyBonds.pdf

The amount they will obtain in the secondary market depends on the prevailing market price of the bond on the day of the sale – wholesale bond prices fluctuate daily.

If the bond holder sells the bond on a day that the sale price is less than the price at which he originally purchased the bond he will receive back less money than he originally paid for the bond. Of course if prices have increased since he purchased the bond he will be able to sell the bond for more money than he had originally paid.

Good loser

Very interesting stuff Black Rock.

The yield to maturity includes capital gain. Is this treated as such i.e. taxed

at CG rates with annual allowance and available for offset against CG losses ?

Black Rock

You will need to take independent tax advice but I believe that the annual interest (coupon) payments (5% for the 2013 Irish Govt. Bond and 4% for the 2014 Irish Govt. Bond) are taxed at an investor's marginal rate of income tax + levies/ USC .

The capital gain on Irish Govt. Bonds are exempt from capital gains tax in the hands of individuals.

http://www.ntma.ie/GovernmentBonds/Daily_Bonds_Outstanding.pdf

doc_17

I don't mean to offend but if you don't even know how to buy a bond then what makes you think you know enough about them to put your money into them? Surely you'd be taking a huge chance?

thebman

doc_17 wrote: »

I don't mean to offend but if you don't even know how to buy a bond then what makes you think you know enough about them to put your money into them? Surely you'd be taking a huge chance?

Well nobody knew how to buy them at the start.

Finding out how to buy them is only one step in the learning process.

If we all ignored things we didn't know everything about, we would still be trying to work out the whole fire and tools thing.

joseywhales

Basically what he ^ said.

I have some spare cash and interest rates are rubbish.

I think Ireland will re-structure it's debt but not for at least two years. And this is all I'm going on.

I read some things about pricing a bond before and it got me interested in actually investing as a learning excercise and possibly a way of earning some interest.

And I helped write some applications for a convertible bonds desk before.

Non of this gives me any idea how I a civilian can invest in such an instrument no matter how much i want to read about it.

The money is spare, I don't want to lose it but if I do it would be a small price to pay if it increased my knowledge and hence my chances of making money in the future when I actually have a substantial amount to invest.

I made the money by gambling anyway, so it wasn't even hard-fought.

doc_17

thebman wrote: »

Well nobody knew how to buy them at the start.

Finding out how to buy them is only one step in the learning process.

If we all ignored things we didn't know everything about, we would still be trying to work out the whole fire and tools thing.

Interesting analogy with the fire! Hopefully you dont get burned. As someone wiser than me said " only gamble what you're prepared to lose"

jakdelad

joseywhales wrote: »

Hi,

If i want to invest in part of a short term Irish bond, how do i do it?

theres always one comedian ,,,,,,,they are out there folks