Government bonds

[tazlgnd]

I have my investments in term deposits at the moment and i was thinking about the stimulus and how the government would be raising money so i decided to look into bonds. The interest on bonds is 7.5% on some currently however to remain profitable bond prices would need to remain the same or increase in price i am pretty sure.

just wondering if now would be the time to buy bonds short term and if it is a relatively safe investment, also i am confused about bond yields etc I thought bonds were the safest form of investment but from what i can see it would be easy enough to lose money off them?

 

[Bodicifer]

Generally as rates fall, the price of bonds rise. Govvy bonds (depending on the government) but talking about Aussie govvy bonds, you won't have a problem if you hold to maturity. Rates at some stage will have to spike which will put pressure on bond prices but again, if you are happy to hold to maturity then it is worth looking at.

If your outlook on govvy bonds is to maturity and you are happy to take the coupon then no problems. The only thing with buying bonds is the minimum denomination is usually half a mill to a mill.

 

[1jasonoz]

Generally as rates fall, the price of bonds rise. Govvy bonds (depending on the government) but talking about Aussie govvy bonds, you won't have a problem if you hold to maturity. Rates at some stage will have to spike which will put pressure on bond prices but again, if you are happy to hold to maturity then it is worth looking at.

If your outlook on govvy bonds is to maturity and you are happy to take the coupon then no problems. The only thing with buying bonds is the minimum denomination is usually half a mill to a mill.

Minimum amount is $1,000 with multiples of $1,000 up to a maximum of $250,000 per day for an individual.

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

How much can I invest?
Applications may be made for amounts of $1,000 face value and in multiples of $1,000 up to $250,000 per investor per day (all series combined). Requests to purchase amounts in excess of this will be considered at the Bank’s discretion.

 

[Chief]

Could you knowledgeable folk tell the board how bonds work?

 

[Bordo89]

Could you knowledgeable folk tell the board how bonds work?

Bonds involve you lending your money to gov or a company for a set time, which they "promise" to pay you back with interest. This is how you get your money. It can be quite risky, and there is always the chance of the company going bankrupt or escaping to mexico. Bonds have a higher return than holding your money in cash (in the bank), but there is a higher risk.

 

[Jimmy_the_Gent]

I would've thought that Government bonds would've been safe as houses, seeing as the Government has a massive income and doesn't want to be seen as dodgy for obvious reasons.

 

[year of the roo]

I would've thought that Government bonds would've been safe as houses, seeing as the Government has a massive income and doesn't want to be seen as dodgy for obvious reasons.

I'll admit bonds are something I know little of, and have never had any, but that sounds right to me. Surely if the Government is guaranteeing people's cash at the banks that they will also guarantee their own bonds?

 

[weagles_fan]

Government bonds are generally very safe. Just like all investments though risk = return. High risk means high return is required to invest in that particular investment.

 

[thesmallprint]

Government bonds are generally very safe. Just like all investments though risk = return. High risk means high return is required to invest in that particular investment.

No I don't think that's how it works. It's more like "High return means high risk is required in the investment".

 

[Frodo]

Take a look at the link provided by 1jasonoz above


Also the coupon rate is much higher than the yield, and remember that it costs you 0.25% up front to buy them.