# What exactly determines state savings interest rates?



## noelÓm (24 Jul 2022)

Is it simply the sovereign borrowing requirement? As in, the NTMA need to borrow to finance a government deficit and so they push up interest rates on state savings products to help do this? Is this what has happened historically?

What would happen if the state ran a budget surplus over an extended period? Would state savings products just become less attractive or do the NTMA try to tie their rates to other market rates somehow?


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## jpd (24 Jul 2022)

There is no magic formula - the interest rate is set to attract the savings that NTMA target


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## moneymakeover (24 Jul 2022)

I doubt if state savings form significant part of overall governmentborrowings

Bonds would be far more significant


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## NoRegretsCoyote (24 Jul 2022)

moneymakeover said:


> I doubt if state savings form significant part of overall governmentborrowings


I mean " significant" is subjective but its in the tens of billions


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## jpd (25 Jul 2022)

State Savings are 8% of Ireland's debt https://www.ntma.ie/business-areas/funding-and-debt-management/statistics


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## noelÓm (26 Jul 2022)

jpd said:


> State Savings are 8% of Ireland's debt https://www.ntma.ie/business-areas/funding-and-debt-management/statistics



8% is not trivial, but I suppose it's unclear how quickly savers would opt to switch to alternative products with better rates.


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## noelÓm (26 Jul 2022)

Does anyone recall how state savings rates responded to interest rate rises in the mid-2000s? Or even during the sovereign crisis?


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## fayf (27 Jul 2022)

I did a few of the 10 years products from about 2010, the highest was a 10 year bond, with 40 % tax free interest, and a further 10% interest, which was subject to DIRT. I believe that was about 2012

They gradually dropped to 45 %, 40 %, and had dropped to 25 % by October 2014, and eventually, down  to 10 % around 2018, but not totally sure of the year.

More in this older thread:





						Historical rates on National Solidarity Bonds
					

Hello everyone. I just signed up here. I hope this inquiry is in the right place.  Would anyone know where I could find the rates available on the 10 year NTMA solidarity bond for June and July 2013. I put away some money in a few of these back then and it looks like the rate applied may be less...



					www.askaboutmoney.com
				




But, i’d say we’l be waiting for another few ECB rate increases, before, state savings will increase. We had historically low interest rates for over a decade, its only now beginning to change, and it will be slow, hence the state savings, are more likely to be slow to increase also. I certainly would not expect any increase to their rates in 2022.


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## Duke of Marmalade (7 Aug 2022)

I don’t think State Savings are an efficient way to fund the government.  Rates are usually higher than on bonds and they are more hassle.  They are stickier, though.
I think they are more of a social service originally aimed at the widows and orphans, and of course grandchildren.  That’s why there are maximum holding limits.
Rates would be higher except for lobbying from the commercial banks that they are unfair competition.  Rates will rise when we see increases in deposit rates, just keeping ahead of them but crucially being tax free.


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## NoRegretsCoyote (7 Aug 2022)

In 2009-2013 or so the state was pretty desperate for funds. Banks were short of deposits too, and were paying decent rates to secure them so there was competition between banks and government.

Banks are swimming in deposits now, and government can borrow easily on the markets. So I suspect state savings rates won't rise very much this time.


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## Odea (10 Aug 2022)

Interest rates on the rise in France for depositors.









						Savings Accounts in France: Livrets, Plan d’Epargne & Other Options - FrenchEntrée
					

Learn about the different savings accounts and schemes available in France including Livret A, Plan d’Epargne Logement, PEA, and Assurance Vie.




					www.frenchentree.com


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## noproblem (10 Aug 2022)

Savings Accounts in France: Livrets, Plan d’Epargne & Other Options​*First published: *22nd June 2021
*Last updated: *1st Feb 2022

Was updated last February!!


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## mcriot29 (29 Sep 2022)

Why no rise on state savings yet another hike on way in October by December there has to be higher rates from state savings surely.


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## Rasputin (29 Sep 2022)

Well the NTMA announced that they are fully funded for the rest of the year already, so they don't need to raise any money, so can't see any reason for them to raise their rates anytime soon.


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## Duke of Marmalade (29 Sep 2022)

Rasputin said:


> Well the NTMA announced that they are fully funded for the rest of the year already, so they don't need to raise any money, so can't see any reason for them to raise their rates anytime soon.


I don't think funding is a driving force in state savings.  After all why have maximum holdings?  It is more of a social service which has tended to match but be slightly ahead of retail deposits.  The interest rate on deposits and mortgages seems very slow to rise for reasons I don't understand but they will some time soon.


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## NoRegretsCoyote (29 Sep 2022)

Rasputin said:


> Well the NTMA announced that they are fully funded for the rest of the year already, so they don't need to raise any money, so can't see any reason for them to raise their rates anytime soon.


State savings are really good value for the Exchequer now that yield on ten-year market debt is over 2% now.

Retail depositors don't disappear in a puff of smoke either.

However they are really in competition with bank deposits. Once they start to rise the NTMA will follow.


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## galway_blow_in (29 Sep 2022)

I’ve 50 k in the post office in the ten year tax free savings bond , interest is circa 1% , I’m going to withdraw it and buy UK government GILTS, 4% plus yield


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## NoRegretsCoyote (29 Sep 2022)

galway_blow_in said:


> I’m going to withdraw it and buy UK government GILTS, 4% plus yield


What's the tax treatment for an Irish resident?

Is the currency risk worth it?


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## galway_blow_in (29 Sep 2022)

NoRegretsCoyote said:


> What's the tax treatment for an Irish resident?
> 
> Is the currency risk worth it?


The pound isn’t the Argentinian Peso, while it could weaken further, I don’t believe for a second that a default is likely, 4% plus even on the two year

Tax would be the same on bond coupons as on dividend yields, UK is pretty benign in that sense relative to Germany or France


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## NoRegretsCoyote (29 Sep 2022)

galway_blow_in said:


> I don’t believe for a second that a default is likely,


Nor do I.

It's completely plausible that UK inflation is 20% more than euro area inflation over the next five years though, which all else equal will see the pound depreciate by the same amount against the euro.


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## galway_blow_in (29 Sep 2022)

NoRegretsCoyote said:


> Nor do I.
> 
> It's completely plausible that UK inflation is 20% more than euro area inflation over the next five years though, which all else equal will see the pound depreciate by the same amount against the euro.


Perhaps but it’s quite possible all that is significantly priced in already?


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## ClubMan (30 Sep 2022)

galway_blow_in said:


> I’ve 50 k in the post office in the ten year tax free savings bond , interest is circa 1% , I’m going to withdraw it and buy UK government GILTS, 4% plus yield


Good luck with that.
The UK is a financial basket case.
What might look attractive in potential interest payments might be more than offset in currency exchange fluctuations.
Eventual default cannot be discounted right now.


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## IsleOfMan (30 Sep 2022)

galway_blow_in said:


> I’ve 50 k in the post office in the ten year tax free savings bond , interest is circa 1% , I’m going to withdraw it and buy UK government GILTS, 4% plus yield


How and where do you purchase UK Government Gilts?


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## galway_blow_in (30 Sep 2022)

ClubMan said:


> Good luck with that.
> The UK is a financial basket case.
> What might look attractive in potential interest payments might be more than offset in currency exchange fluctuations.
> Eventual default cannot be discounted right now.


The Chinese have the same word for opportunity as crisis and the UK isn’t Argentina, they will starve half the population before defaulting , the financial capital of the world is not going to default on sovereign debt

The pound hasn’t moved especially low against the euro, nowhere it wasn’t at as recent as two years ago, everything is on its ass against the dollar


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## galway_blow_in (30 Sep 2022)

IsleOfMan said:


> How and where do you purchase UK Government Gilts?


Through a stock broker


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## NoRegretsCoyote (30 Sep 2022)

galway_blow_in said:


> Through a stock broker


Which adds materially to costs on the way in and the way out.

State savings is the cost of stamp


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## joe sod (30 Sep 2022)

Rasputin said:


> Well the NTMA announced that they are fully funded for the rest of the year already, so they don't need to raise any money, so can't see any reason for them to raise their rates anytime soon.


Yes but that's just for this year, next year could be different story. Yes they managed to refinance alot of the debt at the ultra low interest rates which is good. But now they will have to pay much higher interest rates as more debt matures. I bet they will try and take advantage of this by raising interest rates on state savings bonds soon. The state still has an enormous debt level despite all the recent good news about corporation tax receipts and government surpluses


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## galway_blow_in (30 Sep 2022)

NoRegretsCoyote said:


> Which adds materially to costs on the way in and the way out.
> 
> State savings is the cost of stamp


Yeah , that 15 quid execution fee is a killer alright


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## galway_blow_in (30 Sep 2022)

joe sod said:


> Yes but that's just for this year, next year could be different story. Yes they managed to refinance alot of the debt at the ultra low interest rates which is good. But now they will have to pay much higher interest rates as more debt matures. I bet they will try and take advantage of this by raising interest rates on state savings bonds soon. The state still has an enormous debt level despite all the recent good news about corporation tax receipts and government


Budget was way too generous, not even like they could buy an election with it as no election next year


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## joe sod (30 Sep 2022)

galway_blow_in said:


> Budget was way too generous, not even like they could buy an election with it as no election next year


But maybe there is an election next year, maybe that's why this give away budget, they obviously know that the finances will be much worse next year.  Maybe next spring after the public have benefited from the energy subsidies and tax cuts they will go for election. Michael Martin has finished his stint as taoiseach maybe they are pre emptying the likely moves by fianna fail backbenchers angry at the new green taxes and laws taking effect and the deep unpopularity of eamon Ryan and the green party in rural Ireland


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## galway_blow_in (30 Sep 2022)

joe sod said:


> But maybe there is an election next year, maybe that's why this give away budget, they obviously know that the finances will be much worse next year.  Maybe next spring after the public have benefited from the energy subsidies and tax cuts they will go for election. Michael Martin has finished his stint as taoiseach maybe they are pre emptying the likely moves by fianna fail backbenchers angry at the new green taxes and laws taking effect and the deep unpopularity of eamon Ryan and the green party in rural Ireland


None of the government parties are in good enough shape to elect to fight an election next year


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## Duke of Marmalade (30 Sep 2022)

Has there ever been a default on sovereign debt denominated in the country's own fiat currency? I think even Zimbabwe "honoured" its debt in Z$. simply by printing more of them.  Now, foreign denominated debt is a different kettle of fish.


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## joe sod (30 Sep 2022)

Duke of Marmalade said:


> Has there ever been a default on sovereign debt denominated in the country's own fiat currency? I think even Zimbabwe "honoured" its debt in Z$. simply by printing more of them.  Now, foreign denominated debt is a different kettle of fish.


Did ireland get to denominated any of its debt in irish pounds in the good old days of the 70s and 80s? Well apart from state savings certificates


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## IsleOfMan (30 Sep 2022)

Thanks. I have a Sterling Trading Account with Davy Stockbrokers. So I should be able to buy the UK bonds direct from this account.


galway_blow_in said:


> Yeah , that 15 quid execution fee is a killer alright


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## galway_blow_in (30 Sep 2022)

IsleOfMan said:


> Thanks. I have a Sterling Trading Account with Davy Stockbrokers. So I should be able to buy the UK bonds direct from this account.


Oh well it costs a lot more with Davy , the two traditional brokers in Ireland charge extortionate fees


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## Duke of Marmalade (2 Oct 2022)

UK Premium Bonds said:
			
		

> NS&I to increase Premium Bonds prize fund rate​27 September 2022
> 
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## Silvera (5 Jan 2023)

Is it straightforward for a RoI resident to purchase UK Premium Bonds (and to claim winnings)?


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## time to plan (5 Jan 2023)

Something of a currency risk with Premium Bonds.


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## mct1 (5 Jan 2023)

Silvera said:


> Is it straightforward for a RoI resident to purchase UK Premium Bonds (and to claim winnings)?


According to the application instructions you need a UK bank account and debit card, and - if you live abroad - a certified copy of your passport as well as original or certified recent bank statement.


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