- Thread starter picurka
- Start date
Interest rates
wow. And they are locked in term bonds? Like 1 year or more. US dollar. It is a high interes rate. I know there is a risk to invest in banks but in Canada where I am funds are secured up to 250,000 per account in the event of the bank goes bankrupt. It is the same in the Dominican Republic?
A sovereign bond is always in a country's own currency, in this case - pesos. Most of the sovereign bonds are for 2-3 years or longer. AFAIK, these bonds here are not secured like in the US and Canada - that's why you get the higher interest rate.
Most banks offer deposit certificates in pesos for a fixed term of 1 or 3 months and up to 12 months. The rate is currently about 9% annual equivalent for a 3 month certificate depending on the amount invested.
Dollar rates are very low at banks
Dollar rates are very low at banks
Which bank is offering rates that high on CD's and how much do you have to invest to get that rate?
Years ago, I bought a "special certificate of deposit" from Banco Central. It paid 18% for 3 years. Boy, was that nice! When that ended, I bought some sovereign bonds from BHD that paid 14% for 3 years. Very nice, also. Of course, you're supposed to report any interest earned to the IRS.
So deposit certificates in pesos for 3 months. Let say 1,000,000 pesos would pay 9% annual interest?
Rates for time deposit "investments" at banks are based on the needs of the individual bank and the amount of time one is willing to commit funds, i.e., 3,6,9,12,18 months etc.
Those time deposits can either be paid in pesos or dollars, and in some limited cases euros.
When you use the term bonds, it is not clear if you are referring to the bonds of an individual bank or to sovereign or country bonds. They are markedly different.
Bonds of a bank trade and hinge on the asset quality of that individual bank. Bonds of the DR (country bonds) are separate and unique. They can be for different maturities and be either paid in pesos/dollars/euros. The rate or yield depends on the strength or weakness of the currency they represent at the time of purchase.
FYi, the bonds of the Dominican government currently carry a BB- rating meaning they are non-investment grade and therefore to attract capital may pay a higher interest rate for the risk(s) also, bonds payable in pesos pay a higher rate of interest than those payable in dollars or euros because of the associated risk of devaluation of the currency.
Perhaps the website below will give you an idea of the range of options offered to you.
Respectfully,
Playacaribe2
Thank you for the information. I was thinking Banco Santa Cruz because I have an account with them. But I am just started to think about this and see if it is beneficial. The reason i am thinking of doing this is to earn interest which would help to live in the DR, while I am there for the winter. Like 5-6 months a year. I'm not sure if it is a good idea or not
I've had bonds that paid 50% before that. On top of that, the exchange rate was 60% and when Lionel got elected, it dropped to 33, so my investment doubled in one day.
The right place at the right time.
Good choice. Banco Santa Cruz has a very high credit rating...........higher than the country they reside in. The bank is currently rated investment quality.
The only way to consider investing in peso accounts is a) you live there and the rate of interest supplements or helps support your lifestyle b) you do not get blinded by a higher rate of return in pesos and invest way too much more than needed. If you ever had the need to convert back to your countries currency you may find the cost to convert coupled with the devaluation of the currency a rude awakening.
There have been periods when it paid to be all in with pesos, but those periods were short lived (see the post above). The peso has been devaluing (except for brief periods) for the last 45 years. It has gone from 1;1 against the dollar to its current rate.....meaning if you held pesos from 45 years ago when each peso was worth one dollar, those pesos are now worth less than 2 cents each
Respectfully,
Playacaribe2
So the best is to wait to see how the peso will perform in the new future. But I know that it is not something you can count on. Yes I was just thinking of earning interest as a supplement to my retirement income.
What about US dollar investments? I'm guessing they don't pay as much interest.
Thank you for all the information, i do appriciated
Yes I understand that. Wondering if US dollar investment would be a better option. But it doesn't have as high return Im guessing