Irish Government Bonds for the retail punter

I downloaded the list of Irish Govt bonds from Euronext.

There is just one with 0% coupon:

18-10-2031, price is 79.65 today, code is: IE00BMQ5JL65

The next lowest coupons are two bonds at 0.20%

15.05.2027, mentioned by the Duke above, latest price is 90.73
18.10.2030

So in four years, the tax-free capital gain is approx 9 on 91 purchase price, about 10% capital gain.

Plus there is a 0.2% pa coupon.
 
Duke of Marmalade kindly provides a spreadsheet to calculate returns.

I edited it to reduce the annual fee from 246 to 2.50, which is the DeGiro annual exchange connection fee.

I reduced the commission to zero, although it is actually 3 euro per trade.

The annual return is 2.68%
 
@Roro999

Yes, the 2027 bond is on DeGiro, code is IE00BKFVC568

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Let's say I will always have 20k - 30k on deposit anyways.

My mortgage is fixed at 1.95%, my pension is sorted.

I hold the 30k on deposit, just in case, for a rainy-day, emergency fund, etc.

Is there any downside to instead holding 10k of these bonds?
  • I am currently getting 0.40% on some deposits, some are at lower rates.
  • These bonds deliver 2.60%+ net.
  • If held to maturity, there is no asset price risk.
  • There is no default risk.
  • The tax situation at the moment means the capital gain is tax free.
  • These assets are liquid, and could be turned into cash within a week.

I welcome any comments.
 
The default risk is not zero, but very small. Even US Treasuries have a small default risk
 
Protocol said:
Is there any downside to instead holding 10k of these bonds?
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The big downside is that, if you have to cash before the maturity date and if interest rates have increased, you could lose a fair few bob. The longer the maturity date and the lower the coupon, the more you lose by cashing early in those circumstances.
I'm sure the Duke could modify his spreadsheet to tell you how much you'd lose at various durations for different interest rate hikes.
 
The maturity date is in the name of the bond.

Here are two bonds with 0.20% coupon:

15.05.2027, latest price is 90.73
18.10.2030

There is one bond with zero coupon:

18-10-2031, 0% coupon, code: IE00BMQ5JL65
 
Colm Fagan said:
The big downside is that, if you have to cash before the maturity date and if interest rates have increased, you could lose a fair few bob. The longer the maturity date and the lower the coupon, the more you lose by cashing early in those circumstances.
I'm sure the Duke could modify his spreadsheet to tell you how much you'd lose at various durations for different interest rate hikes.
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Yes, although this has already happened, and that is why these bonds trade well below par.

The question is will this happen more.

By the way, this is one reason why I am nervous of "life-styling", moving from shares into bonds, starting from ten or five years pre retirement.

Bonds can be riskier than shares!!
 
Marc said:
That's interesting although we don't offer an execution only service, our dealing charges are only 0.20% and 0.25% custody and for non-EU ETFs our clients only pay 0.05% with a minimum fee of €40,
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So not really relevant to this discussion then, which is about something entirely different…
 
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I am thinking of actually purchasing the 2027 bond on DeGiro, code FRA | IE00BKFVC568

It is traded in Frankfurt = FRA.

The price is 91 now, the coupon is 0.20%, there are four years to maturity.

The tax-free capital gain is 9/91, nearly 10%.

I am still a bit nervous about doing it.



1683107098400.png
 
Protocol said:
I am thinking of actually purchasing the 2027 bond on DeGiro, code FRA | IE00BKFVC568

It is traded in Frankfurt = FRA.

The price is 91 now, the coupon is 0.20%, there are four years to maturity.

The tax-free capital gain is 9/91, nearly 10%.

I am still a bit nervous about doing it.



View attachment 7471
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I'm of the same mind Protocol. Let us know how you get on and what fee's DeGiro charge!
 
@Protocol Why are you nervous? I am in the process of signing up with Goodbody with a view to buying TB '27. I've already missed about 1% due to price changes.
I thought about De Giro but I just cant feel completely sure of them. I know it is irrational and they are probably sounder than GoodBody but somehow the latter being Irish, owned by AIB which in turn is 75% owned by the Irish government just makes me that bit more comfortable.
 
I just purchased on DeGiro.

It's a bit unclear, as it quoted the price as €91.20, okay so I ordered 55 of them, thinking this would cost about 5k.

However, the cost was 50 euro.

It turns out the €91.20 price is really 0.9120, it seems.

So I ordered twice. The purchase commission is 3 euro.

There will be an annual fee of 2.50, as these are held in Frankfurt.


1683115666394.png
 
As you have bo7ght a bond after the last interest payment date, there is interest due - this is the "bought coupon"
 
In terms of ownership of the Bond, Davy and GoodBody have offered me nominee accounts only. I would prefer to be the registered owner of the Bond, how do I go about this?
 
carmel65 said:
In terms of ownership of the Bond, Davy and GoodBody have offered me nominee accounts only. I would prefer to be the registered owner of the Bond, how do I go about this?
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I’d imagine you’d need to purchase directly from NTMA at the auction
 
carmel65 said:
In terms of ownership of the Bond, Davy and GoodBody have offered me nominee accounts only. I would prefer to be the registered owner of the Bond, how do I go about this?
Click to expand...
+1
GoodBody Ts&Cs actually state that you can choose to be the registered owner but when I put this to them they said not for the government bond. I am an investor novice so I asked a friend who is big into investments and he assures me that there is zero (as near as makes no difference) risk with Nominee Accounts. I would be interested in the views of others on this issue.
 
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