Question about bond yields, and redemption value.

The next Government Bond due for repayment is € 4.39 BN due on 11/11/2011 - it'll be interesting to see what happens then.
 
THE EU / IMF deal must cover these capital repayments. They were known about all throught the negotiations.

Yes, the report today could throw some spanners into the plans.. report by the EU / IMF due out this afternoon, on Ireland's progress to date. Special show on RTE radio, after the 13.30 news. (14-07-2011)
 
jpd said:
The next Government Bond due for repayment is € 4.39 BN due on 11/11/2011 - it'll be interesting to see what happens then.
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there is a 9% yield to maturity on that one,

so that seems to be, if you bought now, you would get ~103% back in November.
 
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The next to be redeemed bond is selling for around 99 I think, so the exact payment should be 104, on the 11-11-11.. I'm not sure how much you'd actually pay to buy it if it's listed at 99 on the ISE. (It was 97.92 a few days ago which would give a much greater return.)
 
Given the chnages announced this week to the interest rate payable and duration of our national loans, can someone help me evaluate the risks now associated with investing in Irish government bonds? What I'm getting at is that the markets are currently pricing in a % probability of default and I'm wondering whether people think (and why) the market has over or under estimated this risk?!
 
Personally I don't think last week's deal has done anything to alleviate an Irish default significantly. All it has done is make sure that future interest bill will not be as high as it otherwise would be, and even at that it is not an amount that will make a difference. Ireland still has a massive deficit, no signs of growth, and a potential debt level of €200 to €250 bn by 2014, which is simply unrealistic.
Personally I still would not touch Irish bonds with a barge pole even with the 10 year yield having dropped from 14% to 12% in the last few days.
 
No, I don't think the deal will be enough, even if I know very little about it.

But the bond prices have risen slightly, (so yields have fallen). The 5% bond I was interested in, the 2013 one, has gone from as low as 76.51 last week to about 87.50 today,.. so the capital appreciation available has been hammered which would be free of Capital Gains Tax.

So before last Thurs was the time, for me anyway. I think the 76.51 price was very low ...for a 5% bond due to be redemmed in April 2013. It was offering CGT free Capital Gains of around 30%, in 21 months)
 
The Irish Post Office bonds were described as a 'rip off' by the personal money expert on Newstalk this morning. (04-08-2011, between 9.28am and 9.32 am)

I know we're not allowed use the phrase 'rip off' here.. I'm just reporting that he said it!

He pointed out that the normal bond markets are paying much higher rates than the post office.


My piece... Unless the Gov.ie was to come out and say, clearly, that in the event of a default the Post Office will not be touched.. unless and until that happens the 10 year solidarity bond, which only pays 1% per year (the rest is bonuses, years 5, 7 and 10), isn't a good deal.

But of course our government is denying to the ground that default is even a possibility... which is delusional in my view, given the yields on the ISE, and our overwhelming debt. (Perhaps I'm wrong, perhaps the Gov does acknowledge that default is a possibility)
 
I agree there are more attractive products out there but there are a couple of things that these commentators seem to forget. Aren't the bonuses on the post office tax free? Isn't the interest charged at DIRT?

You go to a stockbroker and buy a Irish Government bond, you will have a minimum size, stockbroker transaction fees, custodian fees, interest is payable at your marginal rate of tax etc etc. I haven't done the maths but all this makes a difference.

Buying Government bonds directly as an individual is not attractive. The Government should look at changing this as a healthy domestic market for it's securities would be ideal. However a retail customer with 100k to invest will never get the same return as an investor with 100m.
 
Black Rock said:
On the NTMA website www.NTMA.ie there is list of 9 Irish brokers, with names & contact numbers, and it shows the fees that each broker charges. See under "Government Bonds" and then "Where to Buy Bonds". .
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I thought the rates were quite affordable for a modest purchase, say €10k and up.

Slim
 
Yes, I gave approx fees earlier. You can buy for 50 minimum charge, no other fees. These are held in certificated form, and your bank details are lodged with the issuer of the bond.. the interest payments are made directly into your bank, as is the redemption amount. So there's there's only the original 50 Euro purchase fee, (through at least one stockbroker who offers that price, whom I have personally confirmed the price with.)

I think you pay tax on the interest payments, .. but NO TAX whatsoever on the capital appreciation. It's the capital appreciation that can represent good value.

I would now only buy at as little as 20% to 40% for long bonds, and about 60% for bonds maturing within two years.


On the fees... as the bonds are held in certificated form, as opposed to being in a account, there may be fees if you wish to sell, .. fees to 'import' your certificated holding into an account of some sort.


A 50 fee on a 5000 purchase would be 1%. There's 1% stamp duty fee payable on all Irish shares isn't there?, for comparision.


Is there anywhere the bond prices are updated more feequently than daily? The ISE only updates once a day (for Gov Bonds), or five times a week, pretty pathetic really.. even after registering as it said you'd see hourly updates.. there are still no hourly updates.
 

It's fair enough to be taking a punt on getting par back at maturity as long as you are fully aware the risks you are taking.

Also, bear in mind that if you are looking at yields, you need to be aware the published yields assume that you re-invest the coupons you receive at the same rate you invested in. Because of tax and the fact that you probably won't recieve the same return, your yield to maturity is lower than the published one. It also assumes you hold the bond to maturity.
 
JoeBallantin said:
I think you pay tax on the interest payments, .. but NO TAX whatsoever on the capital appreciation. It's the capital appreciation that can represent good value.
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No CGT due by private individuals on gains made on Govt bonds? Are you sure??
 
Protocol said:
No CGT due by private individuals on gains made on Govt bonds? Are you sure??
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Yeah, there is no CGT liability of Government securities.

Gains realised on the following are not taxable:
  1. Irish government securities, including land bonds, prize bonds, savings certificates and bonuses payable under the National Instalment Savings Scheme;
  2. securities of local authorities, certain State-sponsored bodies and the European Union;
  3. futures contracts based on government and other securities that are not chargeable assets for the purposes of capital gains tax;
  4. life assurance policies and contracts for deferred annuities, unless purchased from another person etc.
  5. chattels sold for €2,540 or less;
  6. wasting chattels, such as private motor cars, animals;
  7. winnings from betting, lotteries and sweepstakes;
  8. gains accruing to superannuation funds, charities and certain bodies, such as local authorities and trade unions;
  9. certain works of art valued at not less than €31,740 where they have been loaned to an approved gallery or the proposed Irish Heritage Trust for a period of not less than ten years for display to the public;
  10. a gain on a dwelling-house (including grounds of up to one acre) where the house has been used as an individual’s only or main residence (or, under certain conditions, as the sole residence of a dependent relative) during the individual’s period of ownership. In certain circumstances there may be a restriction on the relief or partial relief may be due.
 
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