Index linked gilts

Ciprico

I'm looking at this for a friend, have no experience of them and they seem very complicated

How are these valued, for example I have a physical certificate saying "amount of stock £12k" but not a figure of number of "units"

Is number of units simply "amount of stock" / 100    ?

Any pointer as to how to find out what this is worth would be very helpful

Thanks 

GeoffTF

I expect £12K means the nominal value. That means that they will trade at £12K * clean price / 100, and be settled at £12K * dirty price / 100 (that will be the valuation). You can get free closing prices from:

https://reports.tradeweb.com/account/login/

GeoffTF

The old style and new style index linked gilts are treated differently. I hold this stock, which is a new style linker:

https://www.hl.co.uk/shares/shares-search-results/t/treasury-0.125-index-linked-gilt-2029

The price quoted there is the clean price. You have to multiply that by the indexation to get the dirty price, which is what you get when you sell. The details are here:

https://dmo.gov.uk/data/gilt-market/index-linked-gilts/

HL and the LSE quote whopping spreads. The spread on the wholesale market is tiny. HL can probably do better for large trades, particularly over the telephone, but your holding is only a small one. Given a certificate, you can sell via the DMO service, which is run by Compershare. You may get a better price if you do that, despite the hefty percentage commission.

Ciprico

The Gilt in question is 2 1/2 % Index linked 2024 - if they hold them to expiry would there still be a "hefty commission" on maturation. They are curently held via Computershare. There are several certificates, in total significantly more than 12k.

GeoffTF

Ciprico said:

The Gilt in question is 2 1/2 % Index linked 2024 - if they hold them to expiry would there still be a "hefty commission" on maturation. They are curently held via Computershare. There are several certificates, in total significantly more than 12k.

No, you should not have to pay commission on maturity. You can see the inflation rate at which an index linked gilt maturing in 2 1/2 years time matches the return of a conventional gilt maturing at the same time from the "UK instantaneous implied inflation forward curve" here:

https://www.bankofengland.co.uk/statistics/yield-curves

It is about 3.5%. If inflation is more than that, the linker wins. Actually, the real redemption yield can vary between gilts of the same maturity. You can see the relevant values on the Tradeweb site referenced earlier. Your index linked gilt is one of the three remaining old style linkers with an 8-month indexation lag:

https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D1D