Gilts Understanding

stone_circle

"better options than Computershare e.g., iWeb, AJ Bell, HL" - iWeb and AJ Bell don't carry gilts. But Interactive Investor do.

I'm comparing savings accounts with same flexibility as Gilts. Namely, zero notice and no (reasonable) maximum, so those fixed\regular savers aren't relevant.

Where is that Gilt Yields screenshot from?

QrizB

stone_circle said:

"others charge a flat fee of £5-10" - what others? I see HL allow purchasing gilts, but their annual fees prob add up to similar or more than Computershare. Any others you know of?

I own a small amount of an individual gilt in my ii SSISA. I bought it using my monthly free trading credit.

At the time I bought it, savings account interest rates were pitiful but (due to political ham-fistedness) the gilt YTM was about 4.5%.

It will mature in September this year.

wmb194

stone_circle said:

"better options than Computershare e.g., iWeb, AJ Bell, HL" - iWeb and AJ Bell don't carry gilts. But Interactive Investor do.

I'm comparing savings accounts with same flexibility as Gilts. Namely, zero notice and no (reasonable) maximum, so those fixed\regular savers aren't relevant.

Where is that Gilt Yields screenshot from?

They do, check again.

You only mentioned £10k so they would be relevant to that sort of amount.

Bloomberg's website.

boingy

Albermarle said:

There are plenty of experienced investors on this site , many with pensions/investments worth a lot .
Probably hardly any of them invest in individual gilts as far as I know . That probably tells you that you are going down the wrong track. New investors are best to look at simple things like multi asset funds or index trackers rather than individual shares/gilts/bonds.

+1 to this. Start with funds, tracking or otherwise, or maybe even funds of funds. I've been actively investing, and learning, for 30 years but only in funds and sometimes individual shares. I've never touched gilts and I have no plans to. By all means learn about them but definitely don't use them as your intro to investing.

wmb194

stone_circle said:

"Gilt coupons are not accumulating." - This form I've just found allows reinvestment, but unclear whether the "Full Title of Stock to be purchased" box can be the gilt you own or if "Stock" means an equity instead (one already purchased thru Computershare?).

'Gilt' is actually a nickname, you'll see that their official names are usually some variation on 'Treasury Stock' so yes, you'd just enter the name of the relevant gilt. For complete accuracy they'll also have an ISIN identification code.

masonic

stone_circle said:

"disingenuous" - I'm not following. Worth continuing existing thread for context IMO. I've said nothing disparaging of earlier posters.

There have been numerous threads from this year discussing contemporary savings accounts vs gilts, with detailed calculations and pros and cons relevant to today's environment. The post you quoted in your reply was from 2 years ago from a time when rates were completely different.

stone_circle said:

Price of GB0002404191 is currently £108, I see. This changes the complexion, but still profitable after ~1 year vs savings.

You can't know whether or not it will be profitable if held for a year. It's entirely possible someone who bought today and sold in 12 months would suffer an overall loss. If held to maturity, there is a guaranteed return. This rate of return is currently equivalent to the rate payable on a 90 day notice account, but the latter carries no risk, whereas trading gilts over the short term is a medium risk activity with the potential to get back less than you invest. In my view, you should not buy gilts with a duration greater than your investment horizon, as this exposes you to a likely capital loss. That makes gilts equivalent to fixed term savings, closest product would be a fixed cash ISA where access is allowed subject to a penalty, rates for those are above 4.5% vs the 4.29% of the gilt you highlight.

stone_circle said:

"others charge a flat fee of £5-10" - what others? I see HL allow purchasing gilts, but their annual fees prob add up to similar or more than Computershare. Any others you know of?

Covered already, but just to reinforce the fact that iWeb does allow gilts to be traded on their platform.

stone_circle said:

"held to maturity, which is advisable, there would be no cost to sell" - advisable to avoid transaction fee, or is there any other reason? Prob don't need to fill a sell PDF form too.

Advisable to avoid risk of capital loss. No, you would not need to do anything at maturity, the proceeds would be paid into your trading account (if you bought £10k of gilts, you'd get back about £9.25k of your capital, i.e. a £750 capital loss).

stone_circle

masonic said:
GB002404191, more commonly known as TR28, has a YTM of 4.29%, not the headline coupon of 6%

How are you arriving at 4.29%? HL define yield as coupon / last night's close. So this is 6% / £108.34 = 5.54% I've updated my spreadsheet. Back in profit well within year one.

masonic

stone_circle said:

masonic said:
GB002404191, more commonly known as TR28, has a YTM of 4.29%, not the headline coupon of 6%

How are you arriving at 4.29%? HL define yield as coupon / last night's close. So this is 6% / £108.34 = 5.54% I've updated my spreadsheet. Back in profit well within year one.

No, you have not factored in the capital loss you will receive as the price falls over time to £100. On a £10k investment held to maturity, your first £750 income goes to making up the capital loss before your investment becomes profitable. Before that there are no guarantees of profit. Sign up for a free account at Tradeweb. This will give you accurate returns calculations based on the closing prices from the previous day.

https://reports.tradeweb.com/closing-prices/gilts/

OldScientist

stone_circle said:

"better options than Computershare e.g., iWeb, AJ Bell, HL" - iWeb and AJ Bell don't carry gilts. But Interactive Investor do.

I'm comparing savings accounts with same flexibility as Gilts. Namely, zero notice and no (reasonable) maximum, so those fixed\regular savers aren't relevant.

Where is that Gilt Yields screenshot from?

You can buy individual gilts on iweb (I have done so), but have to do it by telephone (they contact the market maker directly and, in my relatively limited experience, the spread seems quite reasonable). £5 per transaction. Given the transaction cost, for relatively small amounts, reinvesting coupons is too expensive (iweb don't offer an autoreinvestment service for coupons), so I have chosen gilts with very small coupons (since I intend to hold the gilts to maturity).

Liquidity with gilts is an interesting one - you are right, you can sell at any time, but prior to maturity you may have to sell at a loss (e.g. if yields have gone up, the prices go down).

stone_circle

masonic said:  should not buy gilts with a duration greater than your investment horizon, as this exposes you to a likely capital loss. 

Care to expand? Capital loss as a result of bond price fluctuation? Because prices tend downwards towards par as they approach maturity? There's also upside potential AFAIK.

stone_circle said:

Covered already, but just to reinforce the fact that iWeb does allow gilts to be traded on their platform.

Pls post anything in support of this. I have an iWeb account, and there's nothing on either their research or trading pages.  Answered thanks OldScientist