# Government Bonds



## evoke (2 Jul 2004)

i have certain amount of money in the AIB bank but i am only getting 1.025% interest every year. i would like to put the money i have in government bonds for two years.there i would get higher interest then i would in the bank

Does anyone know where you can purchase these bonds or find out more information about them.  

 i was looking on Irish Stock Exchange Website about bonds    and coundn`t find out on the site when the bonds started.

Do you have to buy bonds on a certain date or can you just buy them at any time


Thanks for anyones help


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## Guest (2 Jul 2004)

You do know that you can get 2.6% gross CAR on certain demand deposit accounts or 2.74% CAR tax free over five and a half years on An Post savings certs?

www.askaboutmoney.com/clu...stBuys.htm

Anyway, the NTMA site has some information about Government bonds in case that's of any use - under National Debt -> Government Bonds in their menu:

www.ntma.ie


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## Brendan Burgess (2 Jul 2004)

Hi evoke

You can buy bonds through any stockbroker. You will get the yield information in the Irish Times on Mondays, I think.

Two big downsides of bonds. 

One - the income is liable to tax at 42% compared to 20% dirt on deposits. (The capital gain may be tax free - check it out if it's relevant). 

Two - you have to pay commission to the stockbroker to buy and sell them

Three - If interest rates rise, the market value of the bonds will go down.

You need to be very numerate to understand them.

Brendan


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## Unit Linked Fund (2 Jul 2004)

*Bonds*

The other option is to buy into a low cost unit linked bond fund.  Exit tax is 23%, funds available at 1% charges.


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## Bongo (2 Jul 2004)

*Take 2*

1% is NOT a low charge on instruments earning less than 3%.  Charges as low as 0.1% are available from some banks - some might even pay more than wholesale rates just to have your money - shop around.


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## Unit Linked (2 Jul 2004)

*Bonds*

Bongo, What Bank is offering unit linked bond fund for 0.1%?  None!! Back this % up with examples.

1% is not as low as it should be but reality is it is low in Irish terms.  This is in the context of 5% bid/offer spreads and 1.5-2% pa mgmt charges.

If you are taking about 0.1%, wholesale rates, in the context of Brokers commissions then you really are taking about large investments.  ALL brokers have minimum transaction charges. 

Medium Term Bonds (7yrs) are grossing 4-5% pa by the way.


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## Bongo (2 Jul 2004)

*Bonds*

Unit Linked, I was referring to bank deposits not unit linked funds.

From today's Irish Times:

Anglo (I have no connection) are paying 2.44% on 1 year money (minimum €2,000)

"Try Oct/05" is payiing 2.43% p.a.  Knock 1% of that!!

Go further out and you will find banks even hungrier for deposits bidding in excess of wholesale rates even for small retail sums.

I accept that 1% is a very low FMC for a unit linked fund but simply not low enough if all they invest in is Government Bonds.


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## Guest (2 Jul 2004)

*Bonds*

I'm confused. Bongo - is your point simply that bonds need to be examined carefully to evaluate if the risk/volatility and charges involved make them worth considering over a deposit account? I don't understand your seeming implication that banks might CHARGE 0.1% to operate a deposit account and then pay out c. 2.5% in interest? On the topic of interest rates it's worth checking the best buys (note 2.6% gross CAR on NR's online demand deposit account):

www.askaboutmoney.com/clu...stBuys.htm


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## Bongo (2 Jul 2004)

*Bonds*

Ms Blank, I was simply stating the bleeding obvious that banks are typically charging 0.1% or even subsidising the wholesale money rates in their hunger for retail deposits.

A Government Bond is nothing more than a wholesale fixed term deposit with the Government - to have 1% per annum deducted from this leaves any unit linked alternative to bank fixed term deposits hopelessly uncompetitive.


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## Guest (2 Jul 2004)

*Bonds*

> Blank, I was simply stating the bleeding obvious that banks are typically charging 0.1% or even subsidising the wholesale money rates in their hunger for retail deposits.

If it was so obvious I would not have asked for clarification. I'm still not clear on what you point is on the 0.1% issue but maybe you can address it when you're less irritable... :rolleyes


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## Bongo (3 Jul 2004)

*Take deep breath - count to 10*

Perfectly calm, Ms Blank.  

Example:

4 year Government Bond - paying 3.5% p.a.
Unit Linked fund with 1% FMC invested in same Bond - pays 2.5% p.a.

4 year interbank rate - 3.5%
Rational bank looks for 0.1% margin, pays 3.4% p.a. on 4 year deposit
Hungry bank subsidizes retail depositor - pays 3.7% maybe


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## bondgib (18 Aug 2004)

More invective than light - bonds do offer a very good diversification argument, and if rates stop going higher (which is possible given that it appears we've had the strong growth globally for the year already in major economies) they could still make substantial capital gains.
Found interesting info on BIAM's site - Bond Book in their Ireland section www.biam.ie - which could provide some basic grounding...Also good FAQ section on globeinvestor.com.
Possibly easiest way to buy bonds is through your online account and using iShares (see TLT quote - long-term US bonds - on finance.yahoo.com)


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