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Are They Advertising Their Liquidity Problems?

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Several banks and building societies are now advertising bonds at 7%+ - where a few short weeks ago no-one was anywhere near this rate. Are they simply telling us how desperate they are for short-term money - and if so should we avoid them?

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Several banks and building societies are now advertising bonds at 7%+ - where a few short weeks ago no-one was anywhere near this rate. Are they simply telling us how desperate they are for short-term money - and if so should we avoid them?

It is probably safer to keep money where savings rate are lowest! High return = high risk.

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Several banks and building societies are now advertising bonds at 7%+ - where a few short weeks ago no-one was anywhere near this rate. Are they simply telling us how desperate they are for short-term money - and if so should we avoid them?

Absolutely. I wouldn't park my money in a fixed bond for 10% leave alone 7%. They need to be offering HUGE risk premium at the moment for term deposits like these. They'll no doubt catch a few people unawares with these token offerings. The credit crunch is hitting hardest in the 3-12 MONTH part of the money market curve.

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Several banks and building societies are now advertising bonds at 7%+ - where a few short weeks ago no-one was anywhere near this rate. Are they simply telling us how desperate they are for short-term money - and if so should we avoid them?

I received this email Friday

Dear Mr and Mrs Saver

‘I like knowing what I’ll get for my money, can you help?'

We certainly can. With our new limited issue eBond, we are offering a fantastic rate of 6.50% AER/6.40% p.a. Gross for six months on a minimum investment of £1,000. Perfect if you like knowing exactly what interest you’ll earn and if you don’t need access to your money for six months.

With such a great rate, there really is no better time to switch any additional savings you may have to Bradford & Bingley, and it’s not just us who think so… Moneyfacts have awarded us Best Internet Only Account Provider for the second year in succession. So for online saving, your money is in the right place.

‘Sounds good, how do I open my bond?’

Opening is easy, all you need to do is click here to log into your account and follow the eBond 15 link.

Yours sincerely

Suzanne Main

eSavings Manager

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It is probably safer to keep money where savings rate are lowest! High return = high risk.

Very true

what if you had opened up one of these 1 year savings bonds with NR in the last week and put 100K in it. you would be writing off the 70K now !!!

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Guest portwinestain

I think they are pretty tempting but I haven't jumped in just yet. If you stick to the 30k limit why wouldn't it be ok?

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Very true

what if you had opened up one of these 1 year savings bonds with NR in the last week and put 100K in it. you would be writing off the 70K now !!!

Are you saying, Swerving Merving and Alistair Darling are liars? :rolleyes:

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I received this email Friday ...

Opening is easy, all you need to do is click here to log into your account and follow the eBond 15 link.

Yours sincerely

Suzanne Main

eSavings Manager

Looks like B&B. I have been saving with them eSavings/ISA for a couple of years and the service is very good.

They also keep up with rate rises quite well (especially if you shift up to the next issue now and then).

I moved it all out Thursday though, want to get as much out of sterling as possible.

Pent

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To be honest I don't think The BOE or the Government will let NR collapse. I'm not saying NR will survive in its pre this week state. OK as a going concern it is holed fatally below the water line, it will not attract savers or mortgage buyers, so its business will be "absorbed" by a bigger fish. This fish will be given the whereforall to do this by the BOE.

King and Darling have drawn a line in the sand, if they fail to hold that line, all faith in the UK banking industry and the government will collapse. Panic will spread from one lending institution to another, no where will be deemed safe by Joe Public, followed by an economic Armageddon. Come on, there are two major props to the UK economy, the housing market and the financial services sector [The City]

You do not need a degree in rocket science to work out that the cost of saving the Northern Rock is peanuts in regard to considering the costs that will be incurred not to do so. They will print money like no tomorrow , where it will hit everybody in the UK via a devaluing pound.

I believe what I have said above is not at odds with my belief that the housing market will correct. I cannot be arsed to explain in full why because it is obvious. Suffice to say mortgage rates will rise, deposit will need to be bigger, high risk borrowers will be priced out of the market. Sentiment is changing, lower demand bla bla bla, in short what you are seeing is the cycle turning to the negative side.

Edited by Catch22

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Looks like B&B. I have been saving with them eSavings/ISA for a couple of years and the service is very good.

They also keep up with rate rises quite well (especially if you shift up to the next issue now and then).

I moved it all out Thursday though, want to get as much out of sterling as possible.

Pent

Yes your right, I ment to say it was the BBBS. And your right again it is the pound that will be hit. I witnessed that on Saturday morning via my trading account, held in GBP but reported bottom line in USD.

I'd be interested to know what currency you are getting into , Euro's ? and with which institution

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Are you saying, Swerving Merving and Alistair Darling are liars? :rolleyes:

I'm not saying they are Liars. both have pointed the finger at the FSA as the source of the 'solvency' claim. (which was made last thursday but what about next thursday or a month next thurday or a year next thursday)

Clearly once they take the BoE up on the unprecidented 'Liar Loan Liquidity Lending Facility' they will be insolvent because they will have been unable to meet their commitments given the monetary framwork provided by the Market the BoE and the Government.

Clearly the solvency of the NR rests upon the valuation of its assets and the possible future default rate of those assets given the fact that the debt merry-go-round has turned into a snarling waltzer.

The terms of the secret 'Liar Loan Liquidity Lending Facility'TM are clearly an issue. the BoE should not value these instruments at anywhere near Par because clearly the Market does not value them near Par. Mervyns credability rests with the terms of the facility.

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Whilst NR is a salutory lesson in how things can go horribly wrong, perhaps we need to step back a little.

Risk and reward have always been inextricably linked. In essence you will not get decent real returns unless there is some risk involved.

Secondly, much seems to be being made of high rates implying a need on behalf of the banks, as if this were a bad thing for savers. The implication is that lending to the needy is a poor idea. This flies in the face of economics. It would seem to me that folks making these assertions have been happy to hold cash when nobody wanted it, but now wish they were in something else, just when their holdings can earn them a good return. What sense does that make?

Remember, these are not high-dividend yielding shares we are talking about. These are cash deposits, with a verbal guarantee from the Govenor and the Chancellor. Outside sovereign debt it really doesn't get any better ... unless you wish to talk gold, which of course yields no income.

What concerns me is the willingness to ditch an asset (in this case cash on deposit) merely because it is now in favour. This tells me that people making these comments will probably always be sitting in out of favour assets. That is not a great recipe for investment success!

My advice is to take advantage of such rates, but realise there are some minimal risks attached, and act accordingly (split your funds).

Edited by Sledgehead

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Looks like B&B. I have been saving with them eSavings/ISA for a couple of years and the service is very good.

They also keep up with rate rises quite well (especially if you shift up to the next issue now and then).

I moved it all out Thursday though, want to get as much out of sterling as possible.

Pent

I'm about to pull all my Bradford & Bingley savings out! Things look potentially a bit shakey for them, so I'm going to put the money into Standard Life and 6 month fixed rate bonds at 7%.

Not sure how safe Standard Life are, but looking at their share price history there dont seem to be any major concerns there.

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