State Savings (NTMA) bonds and certs looking good

I'm going to invest 120k in the state savings 10 year bond , the interest rate seems too high so looks like value to me to get in now. I was paying part of my mortgage down but at 1.1% I had a last look at the best buys thread (cheers Ciaran who updates it ) and I noticed 2.25% tax free and wonder how I missed it , so 120k now and in 10 years I'll have 30k (please god! )

So is it a case of just going to the bank and asking for a bank draft of 120k and go to post office and thats it obviously bring along ID etc.
Thanks in advance
 

Thank you
Just been to the post office , I was advised there to get a bank draft made out to An Post , so I rang state savings to double check they said get a bank draft made out to NTMA state savings.
 


Just to note that a 10 year, tax free, rate of 2.25% may not look so good in 10 years time if interest rates rise appreciably over the term of the bond. Don't forget that your rate is fixed for 10 years so you are taking on a considerable amount of duration risk.

The only interest rate that is appropriate to compare with a variable rate on a home loan (tracker or otherwise) is an instant access, sight deposit or a short term money market instrument.

Comparing a variable rate to a (long-term) fixed rate is comparing apples to oranges.

Having said all that, I certainly agree that state savings certificates and bonds look like good value to me compared to other fixed interest investments with an equivalent term and credit profile.
 
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Thanks Sarenco , this 10 year thing I don't like myself especially looking back at 2013 where it paid 47k tax free now its 25k I can't see much of an alternative I am worried about 120k been worth very little in 10 years time.

Thanks
 
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Hi Fella

Mo money, mo problems!

I think your question may be somewhat off topic for this thread - would you mind posting it as a case study, following the prescribed format, and people can then pitch in with their suggestions?
 
When people speak of diversifying portfolios and having a certain proportion in bonds, do they mean bonds just like these?
 
Bit of a change today - State Savings are sending out certificates for the National Solidarity Bond 10 year and 4 year. They are very similar to the certificates that are issued for savings certificates and savings bonds.

They are for issue 5 of the NSB only but going back to the start of issue 5 in Oct 2014. So if a person bought a NSB in Oct 2014 and didn't encash it, they will now receive a certificate for it.

As a result of this I received 18 letters with certs in today's post!

I wonder if there will be any changes to the NSB purchasing card or if a new issue with a lower interest rate is on the way - hopefully not.
 
I would have no qualms about 2.26% net for 10 years. The State raised 10 year money at 1.2% last week. That 1.2% is taxable, so you end up with less than 0.6% after tax. That's around a quarter of the return from the State Savings product. I also believe that interest rates will stay very low for a very long time, which mitigates the duration risk from my perspective.
 
The other thing that mitigates duration risk is that you can get your money back anytime, with a hit to your return of course, which is tiered based on number of years before encashment. The AER at year 4 is already higher than the (new, as of February) Rabo Notice Saver rates net of DIRT (which is my personal benchmark rate). In the unlikely event that interest rates go up any time in the next several years, you can always bail and switch tack. A higher return would be nice -- having gotten used to the 4% return on 4 yr bond maturing soon -- but am feeling I might have to grin and bear it on the 10 yr bond before it too disappears.
 
Got my seven letters The Ghoul, in the post the other day. I think they should have waited until issue 6 to introduce this.

NTMA sure know how to waste money on stationary, printing, cheques etc.
 
theresa1 said:
Got my seven letters The Ghoul, in the post the other day. I think they should have waited until issue 6 to introduce this.

NTMA sure know how to waste money on stationary, printing, cheques etc.
Click to expand...
I started buying 10 year NSBs in September and got a certificate for the first one, but nothing yet for the others I have bought since. They might be aligning them with the 5 and a half year certs and three year bonds in that when they mature you will be sent a form and an envelope to do something when it matures. At least they aren't sending out letters any more for individual certs and bonds
 
When you purchase a new 4 or 10 year bond you still get an acknowledgement for each purchase.
 
I'l be investing in the 10 year bond when some other policies mature shortly.

Yes, 10 years is a long time, so what i am going to do is make a few seperate purchases, maybe 4, so that it gives me the option of withdrawing one of those, without affecting the other 3,if i need some of the funds, which is very unlikely. The problem with investing say 100k in one bond, is that if your circumstances change in say 6 years time, you have to do a full withdrawal, and you loose the bulk of the interest. The product is structured in such a way that three quarters aporox of the 25% interest accrues in the last few years.
To be exact, 19% of the 25% total interest cumalates in the last 4 years, so the first 6 years only cumalates to 6%

So if you made 4 x 25k bond purchases now, and have to withdraw one of them,.in say 7 years time, you still have 75k which will remain until the full term. But if you only had one 100k bond, and need funds in 7 years time,you will loose the bulk of the interest, as you will have to make a full withdrawal of all 100k as the capital is all tied up into one bond.

I have had a good, and long look around, and for someone who won't risk their initial capital, and doesent need the funds for the forseeable future, there is nothing out there, that comes remotely close. Even if the government drop DIRT to 20%, they would still be way ahead.

All the indicators are for very low interest rates, for 5 years minimum, some analysts say a lot longer.

Even if this is wrong and they start increasing 5 years from now. The 10 year bond is pulling more than 4%, for each of the last 4 years. And no DIRT, and zero transaction charges.

Its a no brainer, and bear in mind, there is always the possibilty the rates will be reduced, so get in now, there is nothing to loose here.

I have also found many comparison sites misleading, as they usually quote Gross Interest before tax, so the comparators are showing the 10year bond at #1 or #2,but when you take the DIRT into account, you realise how far ahead this product is from the competition.
 
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Another lower yield today. 10 year bonds hit 0.77% today.

Surely the NTMA, who say they base State Savings rates on bond yields and deposit rates, cannot justify paying 2.26% for too much longer.
 
Well spotted, the 10 year bond could be cut without notice, thats exactly what happened on each of the recent cuts. I got caught a few years back when i passed on the 5.5 year saving certs, paying 21%,as i was waiting to come out of a bank deposit 3 year deal, with the intention of t/f to 21% yielding saviblng certs when it matures, which i could have exited, i should have l, but did not. Lesson learned, it dropped from a cumalative 21% back in 2011, to just 7% now. Still though, i still have a 21% saving cert bond maturing in a few months, so i have no choice but to leave it there until full maturity.
 
Rates may change on Sunday June 5th 2016 - just a guess as the Monday is a public holiday.
 
Is there a particular reason for that timeline, or, are rates reviewed at that time each year ?
 
Keep looking at this 10 year savings but somethings holding me back , 10 years without 100k it's a long time , could be some opportunities missed have to allow for that. I'm wondering would it be easier to manage 100k myself lending it out in small bits on peer to peer lending sites. Is it too simplistic to think if interest rates stay low equities are likely to rise ?
Although state savings rate comparatively is great it's still not great if you get me , 100k now @35 , 125k @ 45 for me meh it's impossible to know what oppurtinities will arise .
100k into a REIT or 100k into state savings ? What would you choose , I'm edging towards a REIT, even with no share price rise you'll do better in dividends if reinvesting I'd imagine .
 
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