How to purchase government stock GILTS

tinker1

Can someone please give me a step by step guide on how to purchase government stock?
Thanks in anticipation

Nick_C

There are two main types of government stock. "Gilts" are tradable investments at fixed interest rates and terms. New issue can be bought directly from the Debt Management Office, but gilts are mainly traded on the stock market. See http://www.dmo.gov.uk/index.aspx?page=Gilts/Buysell

The undertainty with Gilts is that their price varies until the maturity date.

If you can tie money up, the best way of lending to the Government is through National Savings and Investments. Index linked National Savings Certificates are paying RPI inflation +1%. This is tax free You can buy up to £15K worth in both the 3 and 5 year issues. See http://www.nsandi.com/products/ilsc/index.jsp

purch

step by step guide

1. Open account with Broker
2. Telephone Broker and ask for price in the Stock you wish to Purchase
3. Broker get's price
4. You say I buy X nominal (face value)
5. Broker confirms the instruction
6. Broker debits your trading account the "Dirty" amount (nominal plus accrued interest, since last coupon date)

satellina

Reply to Nick C. I have been looking to buy gilts or treasury Bonds. On a site called 'Digital look' it says they are quaranteed at the interest stated for a certain chosen period. (If I understood it correctly!) They seem to be offering 8 and 9%. Do you or anyone else know what this is about please?

tom188

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/gilt/default.stm

Shows current gilt issues, they are currently yielding something between 4 and 5%.

The coupons can be 8 or 9%, but you will pay for this by buying the bonds at a premium to issue price.

oldwiring

Runnin g yield will be different from the redemption in most cases as they are rarely at par (£100 paid = £100 face value), so the redemption yield may be less, because you will only get the face value back in due course, not what you paid for them. Purchases and sales od "shorts" ( I think that is under 5 years to run) are treated differently in respect of accrued interest.
There is a lot of info at the Debt Management Office site's FAQs
http://www.dmo.gov.uk/index.aspx?page=Gilts/Gilt_Faq