You know when something sounds too good to be true ? 🤔 I’ve had an offer from the Co op bank tied in with Citibank that has got that written all over it . They have a fixed rate bond available offering a return of 11% ! and your capital is guaranteed? As I’ve been away I haven’t responded so they phoned me today . When I asked why you don’t see this product advertised he said everybody would be rich . Something about this smells but I can’t put my finger on it ?
They called you?
How do you know it was them?
If it sounds too good to be true...
(I am not a banker outside of rhyming slang.)
Ah on edit, not a completely cold call then: they were following up correspondence with an offer aimed just at you credibly from them. I'd be very interested in seeing it on those terms... 🙂
As Ant and Dec say.....scammer time!
Almost certainly a scam. Particularly as bonds, or certainly secure ones, don't offer high returns. Out of interest, what are the bonds and how long do they need held for?
No tie in between Coop and Citi afaik. Coop = caring sharing community bank. Citi = global megacorp. Sounds scammy!
nope, not with a barge pole.
IANAGondolier
I seem to remember a thing where a bond was linked to a certain amount of rise in one or other stock market index. If the market didn't go up enough you didn't get your 11% but you got your money back. Meanwhile they get to pocket the interest that you could of been earning in a fixed rate account (approx 4.5% fixed for a year). If the rate does go up enough they are in profit anyway, because they will have a built in margin as well as your 11%.
IANAFA but it sounds like an expensive way to invest.
Something about this smells but I can’t put my finger on it ?
It's everything. Everything about this smells.
It sounds very much like less haste described, I’m in touch with the Co op as I’m sure they’d rather not be associated with something like this .
It doesn't offer a return of 11%, it offers a fixed annual coupon of 11%. That 11% is based on the face value, rather than the market price you'd currently pay to buy it. On maturity you get the face value back, if you still hold the bond. Basically you're loaning the company money and being paid the coupon in exchange for the risk that involves. Your investment isn't guaranteed: the issuer could go bust. It's just like buying shares in that respect. Corporate bonds aren't a scam but the person, presumably your broker, who it trying to sell it to you isn't representing it particularly accurately.
Edit: at least that is how the corporate bond that the Co-Operative offers works. The person you're in contact with could still be trying to scam you.
Mystery deepens , although the e Mail shows the recognisable Co op logo Co op bank and Co operative group are separate companies. Either way first instinct was correct and thanks to those on here who spelt it out better than Citibank banker 🤔 did 👍
It doesn’t offer a return of 11%, it offers a fixed annual coupon of 11%. That 11% is based on the face value, rather than the market price you’d currently pay to buy it. On maturity you get the face value back, if you still hold the bond.
From the sounds of the info in the OP, this (very likely fictional) bond is being offered as an initial purchase. So the 11% coupon rate will be a return of 11%, as he'd be purchasing the bond* at face value.
*Don't purchase the bond, it's a scam. No-one is offering 11% at the moment.
The difference between 'coupon rate' and return is only relevant if you're buying bonds on the secondary market - for joe public, this would typically be as part of a bond fund or ETF. Here's a random example currently offering a yield of 2.73%: https://www.hl.co.uk/funds/hl-funds/hl-building-blocks/hl-multi-manager-stategic-bond
Thanks finbar confirms my gut feeling talking with Citibank, I'm surprised the Coop ( group not bank ) are lending their name to this ? 🤔
This one? https://cbonds.com/bonds/85137/
NB even if there is a legit bond at the end of the day, if I was cold called about it, I'd say no out of principle (the principle being cold calls are mainly scams).
Not cold called Footflaps , I was intrigued when I saw the Co op offering 11% fixed , Citibank were just following up , the more I think about it the more surprised I am that the Co op let themselves be associated with this 🙄
It's not actually scam but it isn't what it seems. It's not a scam as there is a Co Op 11% bond quoted on the stock exchange. But it would cost you 109p in the pound to buy today and you will only get 100p back when it matures in late 2025. So the headline yield is c10% but the yield to maturity (which is the professional's way of looking at the returns over the life of the investment) is probably 7 and a bit %, without me sitting down with a calculator.
The Co-op bank used to be an ethical bank, owned by its members but 10 years ago under the chairmanship of Paul Flowers the "Crystal Methodist" it almost collapsed and was rescued by a group of hedge funds. As far as I can tell those hedge funds are still the owners and its ethical policy is probably worthless.
Alternatively, Citibank could have dreamt up some sort of "guaranteed" product based on Co Op finances. And in the case it's time to dig out the barge pole.
the more I think about it the more surprised I am that the Co op let themselves be associated with this
They can't control who buys and sells their bonds on the secondary market.....
and its ethical policy is probably worthless.
Once you issue a bond you have no control over who ends up owning it...
Just because someone owns a company (as in controls the shares) it doesn't prevent it issuing bonds and similar financial instruments. For example you can buy bonds in both John Lewis and Nationwide, but you can't buy a share in them.
It’s not actually scam but it isn’t what it seems. It’s not a scam as there is a Co Op 11% bond quoted on the stock exchange. But it would cost you 109p in the pound to buy today and you will only get 100p back when it matures in late 2025. So the headline yield is c10% but the yield to maturity (which is the professional’s way of looking at the returns over the life of the investment) is probably 7 and a bit %, without me sitting down with a calculator.
But post-tax it is a nightmare as you pay tax on the interest but dont get a deduction for the loss on the note.
Again, we're into the realms of "it depends".....you could get the interest in full without paying the tax in an ISA or SIPP but you would bear the full loss, or you could get taxed on the interest but use the capital loss if you were lucky enough to be liable for capital gains tax. And there are probably other combinations out there. IANAIFA.
No capital losses on QCBs
