Australian Gov't Bonds?

[Trevor_S]

With "Rudd Bank" probably needing more then the $4Billion the tax payer and the big 4 have chipped in, there may be an opportunity to buy some Gov't bonds in the short term future (i.e this year).

Never having purchased them before, I am curious how it works, how much you need (mid six figures I assume ?), how they are "traded" (ie if you buy say $200K worth, can you on-sell $100K of them etc), is there a market to sell them to, is the rate variable or fixed or both, how long they typically last (10 yrs ?) etc

Thanks for any tips

 

[Gerkin]

I think you should think about the interest rate cycle before buying any bonds at the present point in time.

 

[Trevor_S]

I think you should think about the interest rate cycle before buying any bonds at the present point in time.

Yep, that answered all my queries

 

[MR.]

With "Rudd Bank" probably needing more then the $4Billion the tax payer and the big 4 have chipped in, there may be an opportunity to buy some Gov't bonds in the short term future (i.e this year).

Never having purchased them before, I am curious how it works, how much you need (mid six figures I assume ?), how they are "traded" (ie if you buy say $200K worth, can you on-sell $100K of them etc), is there a market to sell them to, is the rate variable or fixed or both, how long they typically last (10 yrs ?) etc

Thanks for any tips

Firstly, the rate will be approx the cash rate. Just like the banks. Terms would be maybe from 1 to 10 years. Can sell them but recall you will only make money if the rates fall lower than your bond. If you want to sell if the rates go up, you lose.
good luck.

 

[Gerkin]

I was only pointing out you should do more research about bonds and what happens when interest rates move.

If you were to buy them and interest rates rose you will make a capital loss, if interest rates declined you would make money.

Now considering we are close to the bottom of the interest rate cycle why would you even bother buying bonds. The time for bonds was 12 months ago.

Youd be better off buying aust equities inside super, taking the franking credits and wait for the growth.

Thats just my opinion, since you want do any research of your own!!!

 

[auric]

http://www.rba.gov.au/FinancialServices/CGBondFacility/index.html

i agree might have left it a bit late,
i brought some tb116 last year with final maturity in sept this year, you can sell them back takes 3 days so basically they are on call check their buy sell
spread sheet also there is 250 dollar fee

cheers

 

[SoBadAtTrading]

One could buy and sell australian bonds through RBA or a managed fund typically called Australian Bond Fund, etc.

 

[Trevor_S]

I was only pointing out you should do more research about bonds

I wanted to research them, that's why I was asking the question ! I have no particular interest in buying them (at this moment but who knows, maybe in 5 years I might).

It's interesting, ask a question but get no answers to the question asked Aside from the bit of very general info from MR that I knew already and the specific link from auric (thank you).

eg WHERE do you buy them, HOW (and WHERE) do you trade them, WHAT rate.. Then perhaps more questions afterwards, like if they are not offering a decent interest rate above bank deposit rates where the hell is the incentive, the bank deposit are currently gov't guaranteed, or perhaps buy say, ANZ pref shares that pay 2% above the 90 day bank rate etc etc

If I ever did buy them it wouldn't be through a non listed fund, I would want direct investment. I had heard I needed sums of $500,000 or so to buy bonds directly for example but from that link it appears that info was incorrect.

I was asking questions and then hopefully more questions as I gained some understanding

 

[Sir Osisofliver]

I wanted to research them, that's why I was asking the question ! I have no particular interest in buying them (at this moment but who knows, maybe in 5 years I might).

It's interesting, ask a question but get no answers to the question asked Aside from the bit of very general info from MR that I knew already and the specific link from auric (thank you).

eg WHERE do you buy them, HOW (and WHERE) do you trade them, WHAT rate.. Then perhaps more questions afterwards, like if they are not offering a decent interest rate above bank deposit rates where the hell is the incentive, the bank deposit are currently gov't guaranteed, or perhaps buy say, ANZ pref shares that pay 2% above the 90 day bank rate etc etc

If I ever did buy them it wouldn't be through a non listed fund, I would want direct investment. I had heard I needed sums of $500,000 or so to buy bonds directly for example but from that link it appears that info was incorrect.

I was asking questions and then hopefully more questions as I gained some understanding

Trevor

You should also consider whether it is appropriate to use leverage when considering a bond strategy. Hopefully my attempt to attach something has worked and you can see some basic slides I use to present info on bond strategy. Mostly I talk a lot when I present these but basically it works like this...

Purchase Bonds at the top of the interest rate cycle (lets say interest rate and coupon rate of 12% for ease of calculation).

Geared Non geared
Amount invested $100k $100k
Amount borrowed $400k $0
Income $60k $12k

The first year interest rates increase to 14%
Yr 1 interest $56k $0
Yr 1 surplus $4k $12k

Second year interest rates decrease to 12% (where you bought them)
Yr 2 interest $48k $0
Yr 2 surplus $12k $12k

Third Year interest rates decrease to 8%
Yr 3 Interest $32k $0
Yr 3 surplus $28k $12K

Results
Total income $44k $36k

Capital Value (Because we have bought bonds when yields were higher the bonds are worth more.) Here is a calculator http://www.asx.com.au/resources/calculators/bonds/price_yield.htm
Current value ($110.66) $553.3k $110,660

Outcome $44k Income $53k Capital Gain $36k income $10.6k CG

Now go away and work out what the effect is post tax implications.

Meh my little table didn't display - Oh well Still thinks it's legible

Sir O

 

[MR.]

It's interesting, ask a question but get no answers to the question asked Aside from the bit of very general info from MR that I knew already and the specific link from auric (thank you).

lol.......

So, I go out of my way and I've told you what you already knew ?????????

LOL.......

If you already knew,....... then why attack term deposit holders at laughable rates only "then" to go and investigate buying government bonds yourself? Ha.......

One would think the "very general information" given would have been enough to send one so superior running. but no??????

That's alright happy not to answer any questions!

You have given many examples of knowing everything.

Does ASF have "ignore" ?