Long dated gilt funds lost value recently?

jsinc

ratechaser said:

Yes you're right, there is something a bit odd going on here. To Thrugelmir's earlier question, the 2 gilt funds I'm in are

1) L&G Over 5 Year Index-Linked Gilts Index Fund
2) L&G Over 15 Year Gilts Index Fund

I'm invested equally in these 2, in 2 separate old employers schemes. One of them is currently valuing 10% lower than a month ago, the other is 15% lower. I need to take a closer look at the funds but one looks about 2% up over a month and one about 2% down. So I should be flat... can't believe that a 1-2 day lag accounts for that big a swing.

Time for some digging...

Recent yield swings have been huge. Ok one of the funds is index-linked. I don't really follow that market so the fund could be playing catch up or just lower. Will also include additional expectations for real yields, and both markets likely to be influenced by Bank of England additional QE.

Thrugelmir

Apologies as no wish to sound rude.
Do you understand how Gilts actually work? There's sometimes a lack of comprehension. In essence gains may not be what they seem. Particularly with a view to long dated Gilts. 

michaels

UK govt debt is a lot more risky than it was a month ago given the amount of borrowing needed in the next few months, debt to gdp ratio is going to skyrocket so we will see an increasing risk premium n UK bond prices (as happened for Greece and Italy during their crises).  We have also seen related sterling weakness, don't forget the UK has for many years had a twin deficit - not just gov borrowing but also an external deficit so the govt deficit has effectively been financed from abroad rather than from domestic savers.  Foreign lenders are particularly likely to be spooked, especially during a period of uncertainty when the natural reaction is to repatriate funds.

ratechaser

Well I've pretty much given up on this one for the time being. Overnight my pension with Willis Towers Watson has jumped by about 15%, whereas the one I have with fidelity - with the same 2 gilt fund holdings - hasn't moved (although has gradually increased about 6% over the past week).

At the moment I'm putting it down to different administrator processes plus WTW has a landing page notice to the effect that they are struggling to keep up. 

Not intending to make any changes to the portfolio right now in any case, but it would be nice to have a bit more confidence in my regular month end mark to market numbers...

EDIT: having just looked at the valuation delta of these pensions over the last 6 months (which is when I switched to these funds), I can see that they are both nearly flat. So looks like it's all come out in the wash, so to speak. And right now I'd take a flat return over the past 6 months...