# Bunds & Deutsch Bank



## 149oaks (29 Nov 2011)

I will be travelling to Germany next week (I have no account there yet) and have 2 questions:
1. How does one go about buying say €10000 of Bunds? A bank, Post Office?
2. I have read comments in some Posts that Deutsch Bank could be risky. If so why and which German Banks are seen as not risky?


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## justforgroup (29 Nov 2011)

149oaks said:


> I will be travelling to Germany next week (I have no account there yet) and have 2 questions:
> 1. How does one go about buying say €10000 of Bunds? A bank, Post Office?
> 2. I have read comments in some Posts that Deutsch Bank could be risky. If so why and which German Banks are seen as not risky?



The ECB are going to step in and buy up all the debt/print the money to do so, so I wouldn't be bothered travelling anywhere.


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## RabbitHutch (30 Nov 2011)

Can someone explain why Deutshe Bank is not safe, as some have suggested?


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## onq (30 Nov 2011)

A large loan book in a risky economic situation?


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## fionn2011 (30 Nov 2011)

I have a chunk of my saving with deutsche bank. I don't have bunds.They are the biggest bank in germany, and yes they have bad debts ++. However, in this bunds v german deposits issue, my own current view is that a german deposit is better option. Why?

1. You get 2% interest
2. Its value does not fluctuate like bonds
3. They are "guaranteed" by german gov, bonds have no guarantee- some guarantee is better than none at all !
4. If there is a financial meltdown, I would have thought that german gov would protect deposit holders over bund holders- this is main argument for german deposit over bunds
5. The one argument for bunds is that in a euro "divorce", german gov could say non-resident accounts are now not guaranateed or they revert to their country of origin eg punt nua etc. This is possible, but what about Helga & Fritz who lives in Ireland, have irish PPSNs, but have their life savings in home country? Also severe reputational damage to germany for doing this? What above people then whose country of residence is not in the eurozone but have non-resident accounts

I don't have all the answers, feel free to critically evaluate these arguments!! Its point 4 v point 5 really...


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## Troy McClure (30 Nov 2011)

Deutsche bank are leveraged like any other bank. I dont know what level of savings you have but notwithstanding the level of deposit guarantee,  the German government government wont let DB fail. If it's a position of all bets are off then it's run for the hills with tinned food time.
Bunds can be bought but with soverign rates moving upwards this would devalue anyones bunds that are already in place. I agree with fionns points 4 v 5 and thats a personal choice.


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## MoM (30 Nov 2011)

Troy McClure said:


> Deutsche bank are leveraged like any other bank.


 
Well above most banks tbh.



Troy McClure said:


> I dont know what level of savings you have but notwithstanding the level of deposit guarantee, the German government government wont let DB fail.


 
Well they'll try not, but have you looked at the size of DB's balance sheet?



Troy McClure said:


> If it's a position of all bets are off then it's run for the hills with tinned food time.


 
Abut time someone said this. No harm in making preperations in precaution for shops and garages being closed for a few days.


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## MoM (30 Nov 2011)

justforgroup said:


> The ECB are going to step in and buy up all the debt/print the money to do so, so I wouldn't be bothered travelling anywhere.


 
Could you provide us with eveidence that they will do this?

Perhaps you know somthing Dr. Merkel doesn't?


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## MoM (30 Nov 2011)

fionn2011 said:


> 3. They are "guaranteed" by german gov, bonds have no guarantee- some guarantee is better than none at all !


 
I think you need to check your facts there.


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## fionn2011 (30 Nov 2011)

I'm glad I'm getting a debate going- I have been turning this over in my own mind and am on the side of german deposits v bunds. I'm well aware that DB is not the best of german bank, but they are the only bank (for good reasons of course) who are especially receptive to non-residents. Just like here, all the banks are interlinked. They are I believe the biggest retail bank in germany, that counts for something..


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## MoM (30 Nov 2011)

fionn2011 said:


> I'm glad I'm getting a debate going- I have been turning this over in my own mind and am on the side of german deposits v bunds. I'm well aware that DB is not the best of german bank, but they are the only bank (for good reasons of course) who are especially receptive to non-residents. Just like here, all the banks are interlinked. They are I believe the biggest retail bank in germany, that counts for something..


 
Have you thought about diversification.


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## fionn2011 (30 Nov 2011)

Its logistically difficult to set-up 2-3 diff deposit accounts in germany from here. I would have thought all german deposit holders in retail banks would be in the same boat in the event of a meltdown...Guarantee is up to 100K?


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## MoM (30 Nov 2011)

I think you need to look up diversification. i meant aside from German banks


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## 149oaks (30 Nov 2011)

Thanks for the replies & comments but nobody has answered the question I posed:
1. How does one go about buying say €10000 of Bunds? A bank, Post Office?


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## RabbitHutch (30 Nov 2011)

MoM

Can you expand on what you mean by diversification with examples for those of us without experience in money management.

Also, for someone with less than 50k, should they be worried about guarantees and diversification away from a German account?


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## Sunny (30 Nov 2011)

1 year bunds are now returning below zero yield. Just an observation!


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## MoM (30 Nov 2011)

149oaks said:


> Thanks for the replies & comments but nobody has answered the question I posed:
> 1. How does one go about buying say €10000 of Bunds? A bank, Post Office?


 
A trip to Germany, see the German finance agency site You can use a broker, but see MF gloabl as an example of what can go wrong. 



RabbitHutch said:


> MoM
> 
> Can you expand on what you mean by diversification with examples for those of us without experience in money management.
> 
> Also, for someone with less than 50k, should they be worried about guarantees and diversification away from a German account?


 
It means not outting all your eggs in one basket. It involves holding a number of currencies, some physical gold, silver, shares etc.



Sunny said:


> 1 year bunds are now returning below zero yield. Just an observation!


 
I think this will only be a big issue if inflation increases. Most people arent looking to them for their ROI.


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## Sunny (30 Nov 2011)

MoM said:


> I think this will only be a big issue if inflation increases. Most people arent looking to them for their ROI.



Negative yields basically mean it is costing you money to hold German paper. If people are willing to invest in something offering below zero yields or yields of about 1% when inflation is running at 3% because they are looking for safety if the euro collapses, then bunds are not the answer.


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## Chris (1 Dec 2011)

Sunny said:


> Negative yields basically mean it is costing you money to hold German paper. If people are willing to invest in something offering below zero yields or yields of about 1% when inflation is running at 3% because they are looking for safety if the euro collapses, then bunds are not the answer.



Sunny is absolutely right. What also has to be taken into account is that income on Bunds would be taxable as income at the marginal rate, while interest on cash would be taxed under DIRT.


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## MoM (1 Dec 2011)

Sunny said:


> Negative yields basically mean it is costing you money to hold German paper.


 
Yes a miniscule amount.

Certainly alot less than if an FX rate goes against you. A small cost for the possibility of saving 50% of the PP of your capital.



Sunny said:


> If people are willing to invest in something offering below zero yields or yields of about 1% when inflation is running at 3% because they are looking for safety if the euro collapses, then bunds are not the answer.


 
Perhaps you'd tell people the answer then.

And its lazy saying inflation is 3% - EZ is - but last time i looked this was Ireland and inflation is 1.5%



Chris said:


> Sunny is absolutely right. *What also has to be taken into account is that income on Bunds would be taxable as income at the marginal rate, while interest on cash would be taxed under DIRT*.


 
Wow, don't contradict yourself there. They give crap yields but you have to worry about the tax on this crap yield. The tax will be insignificant.

If investors considering this are worried about a small tax differential I can only assume they are doing it for the wrong reasons and havent done their research to differentiate between the different institutions and likely scenarios if/when a catyclismic event happens.


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## 149oaks (1 Dec 2011)

MoM I started this thread and I'm delighted to have received very insightful comments etc from all including yourself so thanks to all.
However I notice Mom that you question/challenge other viewpoints which is good. But I'd be very interested to hear your views on this dilemna i.e. putting money outside Ireland. Please give me your opinion and not a rejection or challenge of others.


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## MoM (1 Dec 2011)

149oaks said:


> MoM I started this thread and I'm delighted to have received very insightful comments etc from all including yourself so thanks to all.
> However I notice Mom that you question/challenge other viewpoints which is good. But I'd be very interested to hear your views on this dilemna i.e. putting money outside Ireland. Please give me your opinion and not a rejection or challenge of others.


 
My own opinion is to opt for diversification. Accept that you may lose a couple of % but what is that in the greater scheme of things. A lot better than 50% devaluation if Ireland ends up using Lenny Pennies or in some Tier II euro. Part in europe, part out of europe. Part in currency part out of it. Gold and shares in companys such as CocaCola and Kraft that will be here long after any doomsday. 

Moral of the story is dont have all your eggs in one basket even if its a German one. 

The euro will probably survive, but not in its current form. But are you willing to bet it will and that there won't be cantagion?

Its all about your risk appetite. Mine is risk averse.


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## diablo73 (1 Dec 2011)

Well what are the dangers of having your savings in a German bank account?


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## tomred (1 Dec 2011)

Hi,

I am also considering buying Bunds and am looking to do it through an irish broker such as Davy's or Goodbody's. My sole purpose is to protect against the possibility of a Euro break up and the introduction of a devalued punt. I understand there will be fees and no ROI. My circumstance is that I have a significant house deposit saved and am trying to protect at least some of it. I am not in a position to travel to Germany. Any Thoughts?

Thanks


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## diablo73 (1 Dec 2011)

If you had your money set aside for a house, in the event we return to the punt won't house prices drop too. So you will be in the same boat as the majority of people in the market looking for a house who had savings devalued. I know those who availed of the German bank/bonds options if they were in the market for the same house as you would be ahead but how many times could that occur in reality?


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## Chris (2 Dec 2011)

MoM said:


> Wow, don't contradict yourself there. They give crap yields but you have to worry about the tax on this crap yield. The tax will be insignificant.
> 
> If investors considering this are worried about a small tax differential I can only assume they are doing it for the wrong reasons and havent done their research to differentiate between the different institutions and likely scenarios if/when a catyclismic event happens.



It's not a contradiction, it is simply something that has to be kept in mind when choosing between cash or bunds in Germany. I fully agree with your point about diversification, but there are ways of diversification that also provide higher income.


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## MoM (2 Dec 2011)

fuzzyfrog said:


> If you had your money set aside for a house, in the event we return to the punt won't house prices drop too. So you will be in the same boat as the majority of people in the market looking for a house who had savings devalued. I know those who availed of the German bank/bonds options if they were in the market for the same house as you would be ahead but how many times could that occur in reality?


 
You wont be in the same position as imports will be more expensive and will likely eat part of your savings. You probably wont want to buy a house anyway with the huge interest rates to curb inflation in this scenario.



Chris said:


> It's not a contradiction, it is simply something that has to be kept in mind when choosing between cash or bunds in Germany. I fully agree with your point about diversification, but there are ways of diversification that also provide higher income.


 
Okay. But the tax amount on a small yield will be very small. I'd be way more concerned about the safety element because if you re doing it for any other reason you're not looking at the bigger picture.

But i think we agree mainly.


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## taytoman (6 Dec 2011)

*Safety Bunds Held Personally v Part of a Life Fund*

Any View on bunds purchased as part of investment policy as opposed to purchasing them yourself?
I know its cheaper to purchase them yourself, but are they any more or less safe as part of an investment policy? Zurich for example have their own german bond fund. I already have money in other funds with zurich, and this may be a cheaper route for me


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## Chris (6 Dec 2011)

MoM said:


> Okay. But the tax amount on a small yield will be very small. I'd be way more concerned about the safety element because if you re doing it for any other reason you're not looking at the bigger picture.
> 
> But i think we agree mainly.



Absolutely agree!


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## captain-kirk (7 Dec 2011)

looking at the deutche bank atm what is all this about them being risky?


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