Beginners

[Perky]

Hi Aaron
I been buying bank preference shares as a replacement for term deposits.
Find them under bonds

TIckers
BNZHA 7.3%
BNZHB 7.28%
ANZBHD 7.6%
or
QHLHA 6.4% Quayside are BOPcouncil investment arm…own POT

Still has some risk but if the banks all get in trouble there probably big trouble elsewhere

DYOR before investing

[Nor]

Can anyone explain the maths of why IFT330 are quoted as price per 100 $104.320 which is a 4.3% increase on issue price but also quoted at yield of 5.98% vs coupon rate of 6.9% which would indicate an increase of
((6.9 / 5.98) - 1) * 100 = 15.3%.
This formula seems reasonable to me because if yield had halved it would give 100% increase which seems right.

[blackcap]

Can anyone explain the maths of why IFT330 are quoted as price per 100 $104.320 which is a 4.3% increase on issue price but also quoted at yield of 5.98% vs coupon rate of 6.9% which would indicate an increase of
((6.9 / 5.98) - 1) * 100 = 15.3%.
This formula seems reasonable to me because if yield had halved it would give 100% increase which seems right.

Maturity 2029. THats 5 years. Yield is quoted till maturity and worked out on a DCF situation.

You pay 1.043 now, get 1.00 in 5 years time and every year get $6.9% per note.

That probably works out to a yield of 5.98% if you pop that in excel.

[Bjauck]

Hi Aaron
I been buying bank preference shares as a replacement for term deposits.
Find them under bonds

TIckers
BNZHA 7.3%
BNZHB 7.28%
ANZBHD 7.6%
or
QHLHA 6.4% Quayside are BOPcouncil investment arm…own POT

Still has some risk but if the banks all get in trouble there probably big trouble elsewhere

DYOR before investing

I have been doing something similar as existing term deposits mature. I don’t want to buy more ordinary shares, and may need some cash at uncertain date in about a year or two and figure selling preference shares and bonds would be (cheaper and) easier than breaking a TD if necessary.

[blackcap]

I have been doing something similar as existing term deposits mature. I don’t want to buy more ordinary shares, and may need some cash at uncertain date in about a year or two and figure selling preference shares and bonds would be (cheaper and) easier than breaking a TD if necessary.

Serious question, are there real penalties for breaking term deposits?

If banks were smart they would allow the breaking of TD's and price it just like a bond would be priced if interest rates change.

[stoploss]

Serious question, are there real penalties for breaking term deposits?

If banks were smart they would allow the breaking of TD's and price it just like a bond would be priced if interest rates change.

You can give notice 31 days I think . Say it us a 2 year TD & you cut out at say 6 months .They will give you a haircut , generally give you what the 6 month rate would have been .

[Nor]

I think making it easy to switch banks is a bad idea, it will just open another avenue to fraud, even worse than what happens when phone numbers are wrongly transferred. I think I heard someone say on the news it should be possible to do it on line. Imagine if instead of just losing your phone number, to which codes might be sent, you found your bank accounts gone. If someone wants to change banks let them open new accounts from scratch.

[Jay]

Reality is not many, relatively speaking, do change banks.
Mentioned in talk about Open banking that in the UK and Aus, not many have changed in any event.
Those I've spoken too that have changed to get a better Home loan rate, only shift what they have to get the loan, leave everything else as is.

Don't need to do that Nor, if got your phone probably easily enough to change your bank internet log ins and lock you out, though I think most just take what funds they can and go and move onto the next victim.
Not worried about what's left.
From what I have read Open banking (initially) is more about easier payments without using a credit card and/or the merchant or payment app such as Kinder accessing your accounts directly like Kinder etc do at present and you letting other organizations accessing some or all of your financial info with your bank so you do not have to print out statements etc for example

[Nor]

If they had your phone they would still need your customer number, which the banks helpfully print on the cards.

[Bjauck]

Serious question, are there real penalties for breaking term deposits?

If banks were smart they would allow the breaking of TD's and price it just like a bond would be priced if interest rates change.

My bank has 1% interest rate Penalty deduction calculated for the expired term since opening the TD. When I asked, the bank made it clear that this penalty could change. Plus there is a long wait - as stoploss said - to get the funds - 30 odd days.

Some bonds are not particularly liquid so there could be a wait until they can be sold. However most of my bonds/notes are reasonably liquid.

All things considered I think there is less hassle, less waiting and less expense to sell bonds compared with breaking a term deposit, should funds be needed. I think it was after the financial crunch, they tightened the rules on breaking bank term deposits.