What is the minimum to hold in Irish Government bonds that pays more than a deposit account after stockbroker fees are deducted

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CuriousCork

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I am thinking of moving a deposit into short term Irish Government bonds.

I presume I have to open an account with stockbrokers. What would their fees be for buying €100,000 of bonds? At what level is it better to hold bonds instead of a deposit account?
 
This is a kind of "how long is a piece of string" question.

If you like the government that much it's simplest and cheapest to buy state savings products but the return is not as good. With more volume you could in principle use an online broker, but am not the expert here.

There is another thread that I can't find that says there is a big tax advantage to buying bonds at the moment given that they trade so far below par.
 
I don't have any experience with this, so hopefully someone who does can confirm if this is correct, but here is my estimate:

From what I can see (but I would like to be wrong about this), the low cost brokers (DEGIRO, Interactive Brokers, etc.) do not support buying bonds on the Irish market (where most Irish Government bonds are traded), so you have to use one of the traditional Irish brokers.

Using Goodbody as an example, it appears from the Transaction Charges section on their help page that their charges are:
  • 1% up to €25k, 0.5% on remainder (min €25)
  • third party charges?
  • €100 annual maintenance charge
Assuming there are no third party charges for Irish Government bonds, and assuming that the bond yield is 2.6%, I think the return (before tax) of investing x in a bond with a duration of n years would be:
0.026 * n * x - 0.005 * (x - 25000) - 0.01 * 25000 - 100 * n

So, if n = 3 and x = 100000, the return would be €6875.
 
I don't have a DEGIRO account, so cannot check that, but their markets page says that they only support a few exchanges for bonds, and Dublin isn't one of them. I think there are some Irish government bonds available on other exchanges that DEGIRO might have access to, but only a very limited selection. (Again, I don't really know anything about this, so might be misunderstanding how it works.)
 
If the aim is to buy Govt bonds below par, and hold to maturity, thereby making a capital gain, I wonder does the CGT exemption apply to all Govt bonds, or just Irish ones?

Buying on DeGiro means way, way lower fees.
 
Even if no CGT is charged in Ireland (someone in another thread said that the tax treatment is the same), I worry about whether there would be taxes due in other countries (or complications with inheritance if I die before the bond matures) if I buy bonds from other EU countries.
 
Ok, thanks.

It's a pity that there is no reasonably affordable way for a retail saver with 100k to buy Irish Govt bonds, and take advantage of the CGT exemption.

By reasonable, I mean not hundreds of euro each year to buy and/or hold.
 
Is there any equivalent of a share certificate for government bonds, which would allow you to hold the bond without needing to maintain an open account at a broker after the purchase?
 
Sovereign bonds are deliberately targeted at institutional investors.

Governments don’t ever want to have to default on voters :)
 
I asked, and the fees for execution-only Irish government bond purchases through Goodbody are apparently 0.35% (at least for a fairly large purchase), plus the annual fee of €246 (including VAT).
 
Can I pick back up on this thread to see how anyone got on trying to buy Irish Government bonds.

I have checked on Degiro and there are bonds up there that have varied maturity dates available. This would seem much cheaper than the brokers here in Ireland. I was looking at bond that has maturity date in May 2027 that is trading at 90.50 at the moment. Not sure what the calculable percentage return is on this, as the coupon is very small. 0.2% I think.
Can I ask is this still tax free if you buy this with someone like Degiro and hold to maturity? Is buying from someone like them the same as anyone else as they are in Holland I think?
 
...Also, I am reading above there is no CGT on Irish Government bonds. Is this still the case if the bond was bought from someone else at a discount thus realising a profit on maturity? Is this profit definitely exempt from CGT?
 
Tobyboy said:
Can I ask is this still tax free if you buy this with someone like Degiro and hold to maturity? Is buying from someone like them the same as anyone else as they are in Holland I think?
Click to expand...
The tax treatment is thd sane regardless of which broker you use.

The 0.2% is taxed as income, and the capital gain of 9.50, (if held to maturity), is exempt from CGT.

Tobyboy said:
Is this still the case if the bond was bought from someone else at a discount thus realising a profit on maturity? Is this profit definitely exempt from CGT?
Click to expand...
You're messing about now with different tax heads - is it a hypothetical question, or do you know someine with bonds? The 'discount' to market value would be subject to CAT. Only the gain from market value would be subject to CGT, but would be exempt.

Edit: I read question as discount to market value. Is that what you meant?
 
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