Index Linked Gilts (Dirty prices)

adamdylan

I do think that this appears a wise investment.... currently. However. taking a step back ......Longterm HL predict shares 6-7% /10 yr So, rather than chase the short term 1 year gain of @7% on a best guess with hassle, perhaps the prudent way forward could be just invest in shares for the long term?     

TheGreenFrog

jake_jones99 said:

I first asked the dealer for some guidance and he said the advised value for buying was 100.93 and selling 98.43. Being a very disagreeable person I asked for a fill-or-kill order with a max of 99.5 just to probe the market. I knew it would be rejected, but what surprised me was they came back with a suggestion of 99.66, which I accepted and then the trade went through. The initial advice was more than 1% higher, they are clearly out there to leave you out of pocket if they can, and seems negotiations are a must. So I get the problem with liquidity. 

What you were initially quoted was probably the LSE quoted spread, and it bears little resemblance to the actual quoted prices.  Same thing with conventionals although quoted spreads are smaller and you can get actual quotes online.  I believe for ILs dealers can see indicative prices and then have to place trade by phone - I wonder if you were speaking to a dealer, and if you were maybe he did not have the indicative prices available at first.  Some brokers seem to place a customer service rep between you and the dealer.

jake_jones99

TheGreenFrog said:

jake_jones99 said:

I first asked the dealer for some guidance and he said the advised value for buying was 100.93 and selling 98.43. Being a very disagreeable person I asked for a fill-or-kill order with a max of 99.5 just to probe the market. I knew it would be rejected, but what surprised me was they came back with a suggestion of 99.66, which I accepted and then the trade went through. The initial advice was more than 1% higher, they are clearly out there to leave you out of pocket if they can, and seems negotiations are a must. So I get the problem with liquidity. 

What you were initially quoted was probably the LSE quoted spread, and it bears little resemblance to the actual quoted prices.  Same thing with conventionals although quoted spreads are smaller and you can get actual quotes online.  I believe for ILs dealers can see indicative prices and then have to place trade by phone - I wonder if you were speaking to a dealer, and if you were maybe he did not have the indicative prices available at first.  Some brokers seem to place a customer service rep between you and the dealer.

Yes i think there was someone in between. He kept saying he'll get back to me after putting my offer to the dealing team.

jake_jones99

adamdylan said:

Hi guys Mindblowing read.!. (Pensioncraft on youtube estimates a return "Why I bought inflation link bonds " 10 min in ) Where can ? and where is best to buy ? and is haggling needed ? Plus any other practical advice? Thanks !

Interesting you mentioned pensioncraft, he made an assumption on inflation and then said "Is that just a guess? Yes!". I used data and ended up with similar numbers. Maybe he just eyed it, given his experience, and got the number it took me 1-2 hours to compute. But in any case let's see what the market says in the next year.

jake_jones99

adamdylan said:

I do think that this appears a wise investment.... currently. However. taking a step back ......Longterm HL predict shares 6-7% /10 yr So, rather than chase the short term 1 year gain of @7% on a best guess with hassle, perhaps the prudent way forward could be just invest in shares for the long term?     

I wonder how HL predict 6-7% per year without any guesses. And wouldn't be surprised if it was their own fund. I think investing full scale in shares on the long term is a good strategy, but currently not something I'd feel comfortable doing.

adamdylan

Jake said :
 I checked the trades on LSE and there aren't many, as you said, but mine isn't even there. Possibly my bonds came from a bigger pot ordered at the same time? Or maybe I dealt too close to the closing time. However, compared to the one displayed, only 3 out of 17 trades were done at a cheaper price. May be beginner's luck. 

If theres a wide variation of price paid shown on LSE, perhaps you could check the trades on LSE prior to buying, pick the cheapest and tell the broker thats your price? 

jake_jones99

adamdylan said:

Jake said :
 I checked the trades on LSE and there aren't many, as you said, but mine isn't even there. Possibly my bonds came from a bigger pot ordered at the same time? Or maybe I dealt too close to the closing time. However, compared to the one displayed, only 3 out of 17 trades were done at a cheaper price. May be beginner's luck. 

If theres a wide variation of price paid shown on LSE, perhaps you could check the trades on LSE prior to buying, pick the cheapest and tell the broker thats your price? 

That's an option. Or just give them an absurdly small price and wait to see what they come up with in return.

pensionslaw

This seems to be the most recent thread on linkers and isn't far removed from my own query so hope it's ok to tack onto it...

I'm interested in TR24: https://www.londonstockexchange.com/stock/TR24/united-kingdom/company-page

Just bought some at £1.5078 dirty price (plus separate payment for 98 days accrued interest). By my calculation, RPI-adjusted face value as at today (including carefully calculated interpolation for part months and noting the 3 month lag on these) is £1.537. Questions:
- have I bought at an effective discount of (100*(1.537-1.5078)/1.537)% i.e. roughly 2% ?;
- if I hold to maturity as planned, is my total return (i) that discount plus (ii) the as yet unpaid coupons (minus what I paid for 98 days accrued interest) plus (iii) change in RPI from (now minus 3 months) to (maturity date minus 3 months) ?
- what is a reasonable forecast range for that RPI change and what would you base it on ?
- can I get a better return with cash deposit levels of safety anywhere else over a 6 to 12 month timescale (am aware of the tax advantages of gilts, my marginal tax rate probably 40% for relevant period).

Thanks. Happy to share experiences if helpful, am buying through AJ Bell platform, where I hold most of my SIPP and ISA and non-tax-wrapper investments anyway.     

Delburn

pensionslaw said:

This seems to be the most recent thread on linkers and isn't far removed from my own query so hope it's ok to tack onto it...

I'm interested in TR24: https://www.londonstockexchange.com/stock/TR24/united-kingdom/company-page

Just bought some at £1.5078 dirty price (plus separate payment for 98 days accrued interest). By my calculation, RPI-adjusted face value as at today (including carefully calculated interpolation for part months and noting the 3 month lag on these) is £1.537. Questions:
- have I bought at an effective discount of (100*(1.537-1.5078)/1.537)% i.e. roughly 2% ?;

Does your calculation of 1.537 allow for the clean price not being 100?  The last trade on LSE was at 98.22 clean price which would fit with the 2% you refer to?

pensionslaw

Maybe not so much "allow for" the clean price being 98.22, as I don't use the clean price in the calculation, maybe more like "tally with" the clean price ?

Side note: still a complete mystery to me how the quoted unit size seems to jump around on these things. Clean price is based on a unit size of 100 (£face value at issue ?), dirty price is seemingly based on a unit size of 1, but in my dealing account the gilt is described as "[blah blah] GBP 1000".