Purchasing government bonds: how, how much and when
Domestic government loan bonds are securities issued by the government to cover the budget deficit. They are essentially a type of loan where money is taken from citizens. You can buy government bonds in order to earn interest.
Some people believe that buying government bonds is a more profitable way to generate income than a bank deposit. This is explained by the higher interest rate, lower taxes and greater reliability from the government.
According to the survey of the Ministry of Finance, the purchase of government bonds for a total of 6 billion hryvnia was carried out during the year. Such figures indicate an increase in the popularity of securities in the market. The volumes of investments in government bonds have grown 4 times, and experts predict that the dynamics will increase. The Ministry of Finance said that next year it will place bonds every week.
The number of securities from the state depends on the amounts provided in the budgets for internal borrowing.
Procedure for purchasing government bonds
According to the law, any citizen of the state or a foreigner has the right to purchase bonds. But individuals are not allowed to conduct operations on the stock exchange on their own. For this purpose, they resort to the services of companies that have a license to trade in securities.
They buy government bonds at primary or secondary markets. Only banks buy on the primary market.
One government bond costs 1000 UAH in the primary market. In the secondary market its price depends on supply and demand, repayment period and other features. In this case, the commission to be paid to the intermediary company is from UAH 500. Often there are several payments.
Profit from government bonds is not fixed. It is affected by the period of placement, the general state of the market. For example, securities can be placed for 3 months at 20.5%, as it was at the beginning of December last year, by its end bonds at the exchange were at 18.9% per annum.
If you purchase ten government bonds under the conditions that were at the beginning of December, you will have to put out 10 thousand UAH. In 2 months this amount will be paid off and UAH 340 will be accumulated at the interest rate. At the same time, the transaction registration costs will be 2 thousand hryvnias on average. It turns out that the acquisition is not quite profitable.
According to experts, it is worth buying at least 100 government bonds to generate income. At investment of the sum in 100 thousand hryvnias it is possible to expect net profit at a rate of 12%.
But it is worth understanding that the real money that you receive at a bank deposit also differs from the declared. And if you compare the deposit and government bonds on this principle, the latter bring more profit at the output, as they are deprived of income tax deductions.