How do you choose a treasury gilt?

far_away

I want to get some treasury index linked gilts. Why would anyone choose any other than the 2030 4 1/8 per cent index linked treasury gilt when it is almost twice by the interest rate Of the others?

Interest Payable
21/2%Index-Linked Treasury Stock 2009
21/2% Index-Linked Treasury Stock 2011
21/2%Index-Linked Treasury Stock 2013
21/2%Index-Linked Treasury Stock 2016
21/2%Index-Linked Treasury Stock 2020
21/2% Index-Linked Treasury Stock 2024 17 Jan 17 Jul
31/2% War Stock 1 Jun 1 Dec
11/4% Index-Linked Treasury Gilt 2017 22 May 22 Nov
41/8% Index-Linked Treasury Stock 2030
2% Index-Linked Treasury Stock 2035 26 Jan 26 Jul
11/8% Index-Linked Treasury Gilt 2037 22 May 22 Nov
11/4% Index-Linked Treasury Gilt 2027 22 May 22 Nov
11/4% Index-Linked Treasury Gilt 2055 22 May 22 Nov

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GDB2222

No, no, no!

Those are the yields based on par prices, available when the bonds were first issued. You are buying in the market at very much higher prices, so the yields actually available are all about the same - around 1% index-linked at the moment. I very, very strongly suggest that you read up about these stocks before going any further. The prices on the longer dated stocks can be quite volatile.

LandyAndy

GDB2222 wrote: »

No, no, no!

Those are the yields based on par prices, available when the bonds were first issued. You are buying in the market at very much higher prices, so the yields actually available are all about the same - around 1% index-linked at the moment. I very, very strongly suggest that you read up about these stocks before going any further. The prices on the longer dated stocks can be quite volatile.

ie If £1000 par value of 4% stock costs you £ 1000 then £1000 par value of 2% stock will cost you £500. Approximately;) . Each would then yield 4%.

far_away

Can't say I really understand what you mean by "par price" etc.
So I you two are saying it doesn't matter which one I pick?

This is the way I make sense of it, is it right?

Originally £1.00 stock would cost £1.00. Now because of the index linking a £1.00 stock would cost more and be worth more at cashing, because it has been added to by the index linking.

Now when you get the interest, say 2%, do you get 2%/2p for each original £1.00 stock, or do you get 2% on each £1.00 stock plus its index linked increase. So if the stock was bought in 1999, and is now worth £1.50, the interest would be 2%/3p?

Is there any plain English reading on this topic? I haven't been able to find any.