The Other Side

Why more expensive buying online?

Why is same government bond more expensive to buy online?

I was attracted by the convenience of buying Singapore government bonds (15-year type) online. But upon checking the prices the difference between buying online and from a bank branch was just too much to make sense to a layman.
The 15-year bond I enquired was supposedly cheaper as per initial price indication online which then was 96.21 cents. But the online website built in a 5% buffer and with accrued interest the cost was 1.02 cents. My question is why is there a need to provide for such a large buffer of 5%? Bonds are not known to fluctuate widely, so it's not to the investor's advantage.
Buying the same bond the traditional way, which requires a trip to the bank branch, where the price quoted was 96.61 cents and with accrued interest the cost to me was 97.3 cents. Needless to say, I bought the bonds from the bank branch instead of going online because the difference was 4 cents, that's a lot of money.
The point is that customers should not be misled by the misconception that its cheaper to buy things online. Do your calculation and comparison before committing yourself to a purchase.

posted by Ek Heng @ 11:54 AM