Directly held zero coupon irish govt bonds V state savings

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NotMyRealName

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Does anyone have any experience with this type of investment? I'm interested in this for a 5 year timeframe. Capital won't be needed for duration, as other liquidity available, re. Instant and term deposits .
From what I read, I can purchase direct through Degiro with low transx cost. 5 year is currently discounted @ approx 85% of redemption value when held to maturity. The 15%+ gain on maturity is not subject to cgt, is my understanding ,as its a zero coupon bond. This is a better return that state savings. Has/does anyone use this type of investment? Around 100k intended here. Have other market ETFs, and no further pension contributions possible, as about to push button on ARF.
 
I bought the 2027 .20% bond 3 years ago. Had to pay 30 bps commission to Goodbody. I don't know about Degiro. They are better than State savings or deposit rates. The one you are looking at is yielding about 3% p.a.
If your tax status is as a married couple with the other half not earning any (much) income you can have them buy a coupon paying bond and earn up to €10k p.a. tax free on the coupons as well as the capital gain tax free, I think.

0.20% 2030 is also yielding c. 3% p.a. Even if you can't shelter the coupon it only knocks c.10 bps off that yield.

What we have is detritus from the zero interest rate panic with many govies standing at discounts.
 
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I presume you are talking about
IE00BMQ5JL65 0% Treasury Bond 2031

It works out about 2.75% pa annum and yes, if you invest € 100k you will get €117 in 2031 and the €17k is taxfree

The only risks are
  1. Irish government gets into trouble and reneges on the debt (unlikely)
  2. Interest rates rise between now and 2031 and you miss out on higher rates (likely)
  3. You need the money before 2031
 
Yes @jpd that's the one. It works out at 3.295% pa compounded. €3 transaction cost on degiro. I've a few etfs there also. Yep, I see those risks also and I'm OK with that.
What are the mechanics that take place on maturity? Is the bond auto-redeemed ? Anyone got any experience of what happens then?
Thanks @Duke of Marmalade , hadn't considered coupon paying bonds yet, but will investigate.
I'm just looking for a reasonable return V inflation and lower risk and tax interaction , just for a bit of diversification.
 
NotMyRealName said:
Does anyone have any experience with this type of investment? I
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Yes, I bought an Irish Govt bond on DeGiro, trading below par a few years ago.

It had 0.20% coupon, I think it was the 2027 bond.

I sold before maturity, so I can't comment on what happens at redemption.

There is just one zero coupon bond remaining, it seems.

1793027364444.webp
 
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@Duke of Marmalade , just wondering, are you the registered owner or the beneficial owner? i.e. is the bond held in trust by goodbody? Would this create any additional risk? What happens if the registered/ beneficial owner dies?......I'm just trying to tease out stuff
 
NotMyRealName said:
just wondering, are you the registered owner or the beneficial owner? i.e. is the bond held in trust by goodbody?
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It is in a nominee holding which I think means Goodbody are the registered owner and we (me and the Duchess) are the beneficial owners. I asked at the time could we be the registered owners. No way! My friend, @Colm Fagan who is a veteran investor assured me that nominee holdings are almost universal.
Is there a risk? Fairly remote, I understand the assets are segregated so even in bankruptcy you are ok though you might have to wait. Of course there could be some massive fraud. I know this will sound bonkers and that folk will tell me Degiro are much more financially sound than Goodbody but I have this feeling that if something really bad happened to Goodbody and our bonds that the Irish government would organise some sort of bail out.

What are the mechanics that take place on maturity?
I had UK 0% Sterling bonds* which matured about a year ago. No problem, day after the maturity date my £ cash balance was credited with the maturity proceeds and of course no deductions.

* I know, currency risk. But after the high jinks of the € crisis, I regard a bit of currency diversification no harm. They would of course be subject to CGT but I have unharvested Capital losses from the financial crisis.
 
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I held some governments bonds with Davy and when they matured, the redemption account just appears in your account
Same with some bonds I held in France

I don't think you have to do anything to redeem them
 
Duke of Marmalade said:
If your tax status is as a married couple with the other half not earning any (much) income you can have them buy a coupon paying bond and earn up to €10k p.a. tax free on the coupons as well as the capital gain tax free, I think.
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So, we won't have any space in that scenario. I take it, then, that any coupon on a bond is taxed at our high marginal rate, is there usc also?
The 2032 paying a coupon of .35% at a discount of 84± could also be of interest
 
Low-risk pension funds tend to hold more bonds.

Bond prices fell sharply after COVID, as inflation rose, and interest rates followed.

This is why many Irish Govt bonds trade below par.

I was looking at the Zurich Long Bond fund, recent heavy losses.

If you see an IGB at 65, that means somebody out there lost 35 on it.

Bonds are not risk-free!!!

Unless you buy newly-issued Govt debt and hold to maturity.
 
Protocol said:
Low-risk pension funds tend to hold more bonds.

Bond prices fell sharply after COVID, as inflation rose, and interest rates followed.

This is why many Irish Govt bonds trade below par.

I was looking at the Zurich Long Bond fund, recent heavy losses.

If you see an IGB at 65, that means somebody out there lost 35 on it.

Bonds are not risk-free!!!

Unless you buy newly-issued Govt debt and hold to maturity.
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Ok. I get that. But that's not the same as a bond bought at a discount and then held to maturity, even at zero coupon. Sure you might have a sub-optimal gain when compared to other possibilities, but it'll still be a gain. Bond funds or etfs are another matter. Anyway, I'm just exploring a bit of diversification really.
 
Bonds are a good match for pension fund liabilities, bonds go down so do pension fund liabilities and vice vearsa, inflation linked bonds can be bought to more generally ‘match’ their inflation linked liabilities so
 
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