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Lock-In Bond

  • 06-03-2013 5:40pm
    #1
    LostOneHelpMe
    Registered Users, Registered Users 2 Posts: 116 ✭✭


    Hi everyone,

    Have a question that Im hoping one of you would be able to answer for me..

    I put some money into a Lock-in bond over a year ago for a four year term with UlsterBank, now the problem is im heading to Canada for two years so I now need that money.

    My question is just how risky is it for me to get that money out or even try get it out??. It says I may lose sum or all of it (money).

    I've trawled the Internet but couldnt get an answer not a proper one anyway and thought I'd ask here before I go to the bank.

    Thanks in advance for any replies:D


Comments

  • #2
    Rhys Essien
    Registered Users, Registered Users 2 Posts: 3,029 ✭✭✭Rhys Essien


    I cant imagine you would lose any of the money you put in but I would say that you will take a cut on the interest gained so far.


  • #3
    Browney7
    Registered Users, Registered Users 2 Posts: 3,100 ✭✭✭Browney7


    Rhys Essien wrote: »
    I cant imagine you would lose any of the money you put in but I would say that you will take a cut on the interest gained so far.
    If they do let you liquidate your position you probably will lose a bit. If this is one of those capital secure on maturity bonds that track the performance of a basket of shares/index they probably work as follows:

    You give them 100 euro. They use maybe 85 of this (depending on prevailing swap rates at the time) to buy a zero coupon bond that will be worth 100 on maturity (providing your capital guarantee) and maybe 10/11 was used to buy the option that will track the performance on the underlying index/shares and they may have taken 4 or 5 (at a guess but I don't know exactly) as a fee for themselves.

    Now you are 1 year in your initial 85 might have a value now of 88/89. If the underlying security is up in value the performance of this will be added on. If it is down or hasn't changed the option won't have any payoff.

    Also, unwinding the position may have a cost which they will pass on to you if they decide to let you out that is.


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