NTMA Cut State Savings Rates - 5 October 2014

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T?he NTMA have cut State Savings rates today. Press release below.

NTMA announces new issues of State Savings products and changes to interest rates

5 October 2014 - The National Treasury Management Agency (NTMA) has today announced:

a) new issues of its range of fixed rate State Savings products
b) a new variable interest rate used to calculate the prize fund for Prize Bonds
c) an increase in the Prize Bonds top weekly draw prize from €20,000 to €50,000




FIXED RATE PRODUCTS

3-year Savings Bond (Issue 16) offering a 2.5% fixed-rate total return (AER1 0.83%)
4-year National Solidarity Bond (Issue 5) offering a 4% fixed-rate total return (AER 0.99%)
· 5½ -year Savings Certificate (Issue 21) offering a 7% fixed-rate total return (AER 1.24%)
· 6-year Instalment Savings (Issue 13) offering a 7% fixed-rate total return (AER 1.24%2)
· 10-year National Solidarity Bond (Issue 5) offering a 25% fixed-rate total return (AER 2.26%)

Note 1: AER is the Annual Equivalent Rate. The AER quoted assumes no early encashment.
Note 2: The AER on Instalment Savings assumes an average term of 5½ years (12 equal monthly lodgements followed by a 5-year term).

All previous issues of these products are now closed to new purchases.

The new rates will only apply to new purchases that are registered from today (Sunday 5 October 2014) and will have no effect on previous issues of fixed rate products. Any money already placed in previous issues of fixed rate products prior to Sunday 5 October 2014 will continue to receive, for their remaining term, the fixed rates applicable to each product on the day of purchase.

VARIABLE RATE PRODUCTS

The variable rate used to calculate the monthly Prize Bond prize fund in November 2014 (and until further notice) will be 1.25%.There will continue to be a €1 million prize in the last weekly draw of each second month, viz. February, April, June, August, October and December. Commencing November 2014 the number of weekly €1,000 prizes is increased from 5 to 10 prizes and the €20,000 prize is increased to €50,000. Based on the current number of Prize Bonds, the new 1.25% rate will generate over 6,000 weekly €50 prizes.

There are no changes to the variable rate on the Deposit Account which continues to pay a rate of 0.25% subject to Deposit Interest Retention Tax (DIRT) or to the Deposit Account Plus (30 day notice) which continues to pay a rate of 0.50% subject to DIRT.

An NTMA spokesman said: “Interest rates have fallen across the retail savings market and there has also been a marked reduction in Irish Government bond yields. The new rates reflect the NTMA’s requirement to ensure that the rates paid on State Savings products are competitive.”


Editor’s Note:
At any time, the NTMA may amend the variable rates on State Savings products and the number and value of Prize Bond prizes, and may close the fixed rate, fixed term issues to new money. Prior to the introduction of any such changes, a notice is placed in the national newspapers and full details are available on www.StateSavings.ie All State Savings money is placed directly with the Government and the repayment is a direct unconditional obligation of the Government
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This cut was not unexpected given that the rates were out of line with deposit rates and sovereign yields.

I will update the best buy threads. The new grossed up equivalents will follow at a later stage.
 
Not unexpected as you say. Appalling rates now being offered, hardly worth the hassle of having your money tied up for such a poor rate. Normally a couple of banks complain about state savings rates before these cuts, dont recall any this time.
 
'The new rates reflect the NTMA’s requirement to ensure that the rates paid on State Savings products are competitive.'

Cutting ensures they are competitive - doesn't make sense to me.
 
As mentioned in another thread I bought EUR1200 worth of 3 yr bonds at 4% (aer 1.32%) last Friday. More luck than judgement in this case. :)
 
theresa1 said:
'The new rates reflect the NTMA’s requirement to ensure that the rates paid on State Savings products are competitive.'

Cutting ensures they are competitive - doesn't make sense to me.
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It ensures that the rates are more in line with their competitors. The NTMA were overpaying, versus the competition, prior to this cut.
 
New grossed up equivalent AER rates attached below.

These are the rates that banks would need to pay to match State Savings rates.

r2w5g4.png
 

Attachments

  • State Savings - Grossed Up Rates 5 Oct 2014.pdf
    70.5 KB · Views: 290
I first invested in State Savings about 2 weeks ago with all the ID etc. I get the impression that they send you a "customer card" making it easier to make subsequent purchases. How long will this take? I'd like to add a bit more the way things are going.
 
It's a few years since I got one, think it took a few weeks but can't be too exact. Did you invest in a 4 or 10 year Solidarity Bond? As far as I know these are the only ones the card applies to. I can't understand why the card can't be used to purchase Savings Certs or Bonds.
 
the ntma sold €500m of 6 month bonds at a negative rate of interest today. I would expect the already woeful rates on state savings to be cut again very soon.:(

[broken link removed]
19 March 2015 – The National Treasury Management Agency (NTMA) has today completed an auction of Irish Treasury Bills, selling the target amount of €500 million.

Total bids received amounted to €1.965 billion which was 3.93 times the amount on offer. The Treasury Bills, which have a maturity of six months, were sold at a yield of -0.01%.
 
sebadoh said:
the ntma sold €500m of 6 month bonds at a negative rate of interest today.
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Negative yield, not a negative interest rate.

sebadoh said:
I would expect the already woeful rates on state savings to be cut again very soon
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Yeah, the NTMA say that State Savings rates are linked to sovereign yields and deposit rates. State Savings products of all maturities pay well above sovereign yields now and for longer dated maturities pay well above deposits. Another drop is surely coming.
 
NTMA State Savings products, as at today, are higher than deposit rates for all terms of 3 years and longer.

Also, the gap between NTMA State Savings product rates and sovereign yields has grown in recent weeks.

NTMA cut coming?
 
T-B-M said:
It will probably take about a month for the card to arrive.

If you paid by cheque, they'll cash this early on. After 3-4 weeks you will get a statement/receipt of lodgement. About a week after that you will get the card.
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Thanks for this, the card came after about 4 weeks, just before I was travelling so I was able to redirect some funds.

CiaranT said:
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NTMA cut coming?
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Bank holiday weekend!!
 
Just back from local post office getting another 10 year bond in case rate drops this weekend. My bet is it will happen June bank holiday.
 
Thanks, maybe history will repeat. State Savings rates are once again out of sync with deposit rate and sovereign yields.
 
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