Irish Government Bonds for the retail punter

It is possible to target the steepest part of the yield curve and hold for a shorter duration than to maturity and this can make sense if your transaction costs are low enough.
 
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My reading of this post is that if you buy these bonds you are not subject to CGT on the disposal or redemption, but are subject to income tax.

Am i reading this wrong?

BTW - thanks to @Protocol for these docs/links.
 
daheff said:
View attachment 7819


My reading of this post is that if you buy these bonds you are not subject to CGT on the disposal or redemption, but are subject to income tax.

Am i reading this wrong?

BTW - thanks to @Protocol for these docs/links.
Click to expand...
They are taxed as income if you are dealing in bonds as part of a trade, not if you are a mere retail punter in which case the first part of this paragraph applies i.e. gains are exempt from CGT
 
Duke of Marmalade said:
They are taxed as income if you are dealing in bonds as part of a trade, not if you are a mere retail punter in which case the first part of this paragraph applies i.e. gains are exempt from CGT
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Can you please explain what it meant "as part of a trade"?

I guess there's a technical definition of a trade which I am not aware of

Tia
 
You would be considered as trading in bonds if you execute multiple trades regularly such as every day or few days

If you purchase a bond and hold it to maturity or for a few months or years, that is not trading
 
Very informative thread, thanks.

A few questions that I am hoping someone might be able to help with:
- I understand that the tax on the coupon (if you are paid a coupon) is subject to income tax. Is this declared to the Revenue as part of your Form11/12 annual return under "dividends & distributions"?
- I get zero search results when I search for "Ireland" under bonds on Degiro. Anyone know what I am doing wrong? Do I need to search by ISIN?
- Any recommendations on a website to calculate the yield?

Thank you!
 
- Perhaps "Irish Government Stocks"?
- DEGIRO does not provide access to bonds on the Irish Stock Exchange, only on the Frankfurt Stock Exchange, where they are apparently listed as "Irland"
 
Yes, coupon interest is subject to income tax.

Yes, declare on Form 12 or 11 as normal.

Somebody on here, or maybe on Boards.ie, did a nice spreadsheet to show yields.
 
SerenaZ said:
Very informative thread, thanks.

A few questions that I am hoping someone might be able to help with:
- I understand that the tax on the coupon (if you are paid a coupon) is subject to income tax. Is this declared to the Revenue as part of your Form11/12 annual return under "dividends & distributions"?
- I get zero search results when I search for "Ireland" under bonds on Degiro. Anyone know what I am doing wrong? Do I need to search by ISIN?
- Any recommendations on a website to calculate the yield?

Thank you!
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Yes, the income is declared under self assessment.
I attach a spreadsheet for calculating the after tax yield. It uses what for me was by far is the best candidate: Treasury '27 0.20%.
It is for a new customer with Goodbody, which I was, and so it uses standard Goodbody commission rates and also the new customer admin fees of €246 p.a.
You may be able to negotiate lower commission, I got them down to 0.40%, but I am a hopeless negotiator. Of course you may be using these very cheap platforms. You can make the inputs suit your circumstances and then click "Calculate Yield".

Update:
Oh dear! I tried to use my own attachment and got blocked because it uses macros. So if you know your way around Excel you can get the yield by a Goal Seek: Set Cell E16 to 0 by changing Cell B12.
 

Attachments

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SerenaZ said:
Thanks @Duke of Marmalade and all.

@Duke of Marmalade - Why do you not just use Degiro to avoid those fees with Goodbody?
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Very good question. Irrational I am sure but GB was just a name I sort of trust.
For example, my bank is AIB but I am sure there are cheaper and even safer banks out there, maybe that Bunq crowd but not for me!
I actually wanted bond certificates to keep under my pillow but GB insisted on Nominee Accounts which I was not 100% comfortable with but I think they all use Nominee Accounts.
 
Although the DEGIRO fees are attractive compared to regular brokers, I wonder whether the price of the bond might be worse on the Frankfurt exchange (where DEGIRO performs the transaction) compared to Euronext Dublin (where regular brokers perform the transaction), and whether this might mean that for large purchases it is in fact more economical to use a regular broker. At the time of writing the Frankfurt exchange shows the bid price 78.41, and ask price 78.84, while Euronext Dublin just says 78.64, for the 0% IE00BMQ5JL65. I notice that the Dublin price is about half way between the Frankfurt bid and ask, which I imagine is as expected. Does anyone know what the bid-ask spread is like for these bonds on Euronext Dublin? If enough of us ask, I wonder whether DEGIRO would add the ability to trade bonds on Euronext Dublin.
 
jpd said:
As you have bo7ght a bond after the last interest payment date, there is interest due - this is the "bought coupon"
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I always thought the price of a bond reflected accrued interest - this is why they have the tax rule called bondwashing ? am I wrong ?
 
decko said:
Has anyone considered the pros and cons of a tax free gilt versus say JPM money market fund - which even though taxed at 41% yields c.3.7% ?

seems to me there is very little in it on an after tax basis

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JPM EUR Liquidity LVNAV E (acc.) | J.P. Morgan Asset Management

View performance data, portfolio details, management information, factsheet, regulatory and other documents
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Below is the current euro yield curve. I haven't studied the JPM money market fund in detail but I'll give it the benefit that it gives close to the current wholesale money market rate. As you can see this is indeed near 3.7% but, all else equal, if you hold till May '27 (date of best Irish bond) you will earn gross 2.84% p.a. 41% exit tax would reduce this to about 1.7%. This is quite inferior to the after tax return available on the '27 bond.
1695136545595.png
 
Duke of Marmalade said:
Below is the current euro yield curve. I haven't studied the JPM money market fund in detail but I'll give it the benefit that it gives close to the current wholesale money market rate. As you can see this is indeed near 3.7% but, all else equal, if you hold till May '27 (date of best Irish bond) you will earn gross 2.84% p.a. 41% exit tax would reduce this to about 1.7%. This is quite inferior to the after tax return available on the '27 bond.
View attachment 7944
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yes indeed i guess i am looking at a shorter horizon
 
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