buying an individual gilt question

masonic

You can use the EDATE function for this, e.g. =EDATE(cell, 6)

aroominyork

I've made a couple of changes, building in the accrued interest cost and correcting the payment dates on TR30 to June and December and now the two outcomes diverge again. Any idea why?

Code	Redeem	Coupon	Payments	Income	Price	YTM
TG30	22/10/2030	0.375%	17	£    3.19	£    73.88	4.23%
TR30	07/12/2030	4.750%	17	£   40.38	£   105.00	3.61%
	22/04/2022				07/06/2022
TG30	30/09/2022	-£   74.05		TR30	30/09/2022	-£ 106.50
	22/10/2022	£    0.19			07/12/2022	£    2.38
	22/04/2023	£    0.19			07/06/2023	£    2.38
	22/10/2023	£    0.19			07/12/2023	£    2.38
	22/04/2024	£    0.19			07/06/2024	£    2.38
	22/10/2024	£    0.19			07/12/2024	£    2.38
	22/04/2025	£    0.19			07/06/2025	£    2.38
	22/10/2025	£    0.19			07/12/2025	£    2.38
	22/04/2026	£    0.19			07/06/2026	£    2.38
	22/10/2026	£    0.19			07/12/2026	£    2.38
	22/04/2027	£    0.19			07/06/2027	£    2.38
	22/10/2027	£    0.19			07/12/2027	£    2.38
	22/04/2028	£    0.19			07/06/2028	£    2.38
	22/10/2028	£    0.19			07/12/2028	£    2.38
	22/04/2029	£    0.19			07/06/2029	£    2.38
	22/10/2029	£    0.19			07/12/2029	£    2.38
	22/04/2030	£    0.19			07/06/2030	£    2.38
	22/10/2030	£ 100.19			07/12/2030	£ 102.38
		4.28%				4.06%

masonic

aroominyork said:

I've made a couple of changes, building in the accrued interest cost and correcting the payment dates on TR30 to June and December and now the two outcomes diverge again. Any idea why?

Because you haven't factored in the cost of the accrued interest upon purchase, and this is more substantial for TR30. You could address this either by calculating a pro-rata first interest payment, or adding on the appropriate number of days interest to the acquisition price. Edit: maybe you have already added it to the acquisition price

aroominyork

masonic said:

aroominyork said:

I've made a couple of changes, building in the accrued interest cost and correcting the payment dates on TR30 to June and December and now the two outcomes diverge again. Any idea why?

Because you haven't factored in the cost of the accrued interest upon purchase, and this is more substantial for TR30. You could address this either by calculating a pro-rata first interest payment, or adding on the appropriate number of days interest to the acquisition price.

I did include it. £73.88 became £74.05 and £105 became £106.50.

EthicsGradient

Or it could be that you're using the prices for the last trade of the day given on the LSE site, but these don't match what they reckon as "the closing price".
TG30: last trade 73.88, closing price 74.17 https://www.londonstockexchange.com/stock/TG30/united-kingdom/company-page
TR30: last trade 105.00, closing price 104.20 https://www.londonstockexchange.com/stock/TR30/united-kingdom/company-page

I suspect the 'last trades' aren't meaningful - the 105 for TR30 was dated 29 Sept, and the one before that is 27th Sept. Using the closing prices, and I think the yields will look similar.

masonic

aroominyork said:

masonic said:

aroominyork said:

I've made a couple of changes, building in the accrued interest cost and correcting the payment dates on TR30 to June and December and now the two outcomes diverge again. Any idea why?

Because you haven't factored in the cost of the accrued interest upon purchase, and this is more substantial for TR30. You could address this either by calculating a pro-rata first interest payment, or adding on the appropriate number of days interest to the acquisition price.

I did include it. £73.88 became £74.05 and £105 became £106.50.

I realised this just after posting, I'd thought initially you'd added an equal amount of spread onto each price.

I don't think this level of difference is necessarily indicative of an error given the differences in income payment and maturity, and of course the fact you are using different time points for the starting price due to lack of trading activity.

aroominyork

EthicsGradient said:

Or it could be that you're using the prices for the last trade of the day given on the LSE site, but these don't match what they reckon as "the closing price".
TG30: last trade 73.88, closing price 74.17 https://www.londonstockexchange.com/stock/TG30/united-kingdom/company-page
TR30: last trade 105.00, closing price 104.20 https://www.londonstockexchange.com/stock/TR30/united-kingdom/company-page

I suspect the 'last trades' aren't meaningful - the 105 for TR30 was dated 29 Sept, and the one before that is 27th Sept. Using the closing prices, and I think the yields will look similar.

Bingo!

Code	Redeem	Coupon	Payments	Income	Price	YTM
TG30	22/10/2030	0.375%	17	£    3.19	£    74.17	4.18%
TR30	07/12/2030	4.750%	17	£   40.38	£   104.20	3.71%
	22/04/2022				07/06/2022
TG30	30/09/2022	-£   74.34		TR30	30/09/2022	-£ 105.70
	22/10/2022	£    0.19			07/12/2022	£    2.38
	22/04/2023	£    0.19			07/06/2023	£    2.38
	22/10/2023	£    0.19			07/12/2023	£    2.38
	22/04/2024	£    0.19			07/06/2024	£    2.38
	22/10/2024	£    0.19			07/12/2024	£    2.38
	22/04/2025	£    0.19			07/06/2025	£    2.38
	22/10/2025	£    0.19			07/12/2025	£    2.38
	22/04/2026	£    0.19			07/06/2026	£    2.38
	22/10/2026	£    0.19			07/12/2026	£    2.38
	22/04/2027	£    0.19			07/06/2027	£    2.38
	22/10/2027	£    0.19			07/12/2027	£    2.38
	22/04/2028	£    0.19			07/06/2028	£    2.38
	22/10/2028	£    0.19			07/12/2028	£    2.38
	22/04/2029	£    0.19			07/06/2029	£    2.38
	22/10/2029	£    0.19			07/12/2029	£    2.38
	22/04/2030	£    0.19			07/06/2030	£    2.38
	22/10/2030	£ 100.19			07/12/2030	£ 102.38
		4.22%				4.18%

masonic

EthicsGradient said:

Using the closing prices, and I think the yields will look similar.

Raises the question how is the closing price determined when there is no recent market activity to support it? Just the mid-price between market makers' bid and offer prices?

EthicsGradient

masonic said:

EthicsGradient said:

Using the closing prices, and I think the yields will look similar.

Raises the question how is the closing price determined when there is no recent market activity to support it? Just the mid-price between market makers' bid and offer prices?

I wonder if what the LSE shows us is the only, or even main, trading place for gilts. For instance:

ORB is not expected to impact existing wholesale bond or gilt trading and trade reporting arrangements and does not aim to change established practices in the institutional fixed income markets.

https://www.lseg.com/sites/default/files/content/documents/ORB Service Description.pdf

masonic

I suppose the only price that matters is the quote you're given when you try to place an order.