DIY or IFA

Pat38493

JohnWinder said:

The latter. I don’t think you can buy by auction at issuance unless you are registered to do so and have been through a tiresome anti-money laundering check. And you wouldn’t want to try to buy them at the auction because having no idea of what they are worth, you could overpay or just waste your time with an under-bid. Forget auctions for government bonds. Pay the asking price, if you can afford it and if the buy/sell spread is not too big.

I hesitate to ask - but what in plain English is the buy/sell spread?  Is this something to do with the uncertainty in the transaction you are making?

Linton

Pat38493 said:

JohnWinder said:

The latter. I don’t think you can buy by auction at issuance unless you are registered to do so and have been through a tiresome anti-money laundering check. And you wouldn’t want to try to buy them at the auction because having no idea of what they are worth, you could overpay or just waste your time with an under-bid. Forget auctions for government bonds. Pay the asking price, if you can afford it and if the buy/sell spread is not too big.

I hesitate to ask - but what in plain English is the buy/sell spread?  Is this something to do with the uncertainty in the transaction you are making?

A buy/sell spread is when there are separate sale and buy prices so you sell for a lower price than you buy.  Shares and bonds traded on the market always have a buy/sell spread since that is how the market makers get paid.  I note that HL have a 1% spread on bonds.

Most funds sell and buy at the same price.

JohnWinder

The buyers offer a price they’ll buy at, and the sellers offer a price they’ll sell at. If the two are different, there’s a stand-off until one moves to the other’s value. That difference between the buy and the sell price is the buy/sell spread. The ‘best’ estimate of true value is between the buy and the sell price, so if the spread is wide you will be paying a ‘lot’ more than true value or receiving a lot less if you sell. Not as good as if the spread is very low. In low liquidity markets you tend to see bigger spreads. Liquidity? Investopedia.

coyrls

My experience with Halifax is that they quote a spread but say it's likely they can do better, they then get the best quote they can, which in my case brought the price down near the previous day's close (which was the figure I was working off).   You get the opportunity to accept or reject that price.  With index linked gilts, all these quotes are at the "clean" price, what you actually pay is the "dirty" price (with RPI to date added).  When the bonds appear in your account, it looks like you've made an immediate loss because the current price is the clean price but the purchase price is the dirty price.