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Now the time for Government bonds?
Investing strategy
With the RBA likely to cut rates atthe next few meetings, is now a good time to invest in government bonds? I'm looking at GSBG26 and GSBG27 in particular as short to medium term investments and wanted to ask the pros and cons of this vs putting extra in the mortgage offset?
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Thomas Young
Asked on 6 May 2025
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I like the question.
I think tax will eat most of the gain on the bonds compared to no tax on the saving you make on the offset.
But just the higher rate 2027 maturity bond could come out ahead if mortgage rates come down a fair bit.
Many assumptions in spreadsheet below, tax 30%, 6% starting mortgage rate, buying multiple of $100 face value on commsec price today. Getting both coupons on GSBG26 (Oct-25 and Apr-26). 11 months of mortgage savings in 1st year. Please correct me if I’ve missed something.
GSBG26 GSBG27 Offset no cut Offset cut
Rate 4.25% 4.75% 6% 5%
Maturity 21/04/2026 21/04/2027
Buy price $100.85 $103.16
#bought 0.99 0.97
interest -26 $4.25 $4.75 $5.50 $4.58
interest -27 $0 $4.75 $6.00 $5.00
tax $1.28 $2.85
sale $99.16 $96.94 $100.00 $100.00
gain $3.81 $9.71 $11.50 $9.58
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