US Treasuries

crisis_management

Does anyone have any experience in buying T-Bills? The yields look attractive, but I'm a complete novice here.

wmb194

crisis_management said:

Does anyone have any experience in buying T-Bills? The yields look attractive, but I'm a complete novice here.

Any particular reason for USTs over gilts? Gilts appear to have better yields at the moment and the ones you can buy below par will offer mostly tax-free returns (they're exempt from CGT).

Otherwise, you just use a broker that offers them. From your posting history it appears you have an iWeb account; I don't know about USTs but iWeb offers gilts.

https://www.bloomberg.com/markets/rates-bonds/government-bonds/uk

simon_or

wmb194 said:

crisis_management said:

Does anyone have any experience in buying T-Bills? The yields look attractive, but I'm a complete novice here.

Gilts appear to have better yields at the moment and the ones you can buy below par will offer mostly tax-free returns (they're exempt from CGT).

If par is £100 and I buy below par at say £90 and hold it to maturity, the interest I get along the way is taxable but the gain of £10 is tax free?

crisis_management

Thanks for the link. The duration of the tbills seem much shorter - just a few months, rather than 2 yrs, but, as I said, I don't really have much experience with bonds.

Aretnap

US Treasuries are a big risk for a UK based investor because your returns are defined in dollars, not pounds. Assuming you want to convert your money back into pounds at some point, how much you will get depend as much on currency fluctuations over the lifetime of the investment as on the par and coupon of the bonds. If the value of the pound increases relative to the dollar over the next few months then you will get back less than you expected, possibly less than you paid in. If you're looking at short dated government bonds then presumably it's because you're looking for a low risk home for your money, so throwing in a load of currency risk didn't sound ideal.

There are ways of mitigating the risk such as hedging, ie agreeing with a financial institution to sell your dollars to them at a set exchange rate in the future but (1) that adds cost - the financial institutions don't offer their services for free and (2) it exposes you to counterparty risk - if the financial institution goes bust in the meantime it's tough luck on you.

wmb194

crisis_management said:

Thanks for the link. The duration of the tbills seem much shorter - just a few months, rather than 2 yrs, but, as I said, I don't really have much experience with bonds.

That isn't even close to being an exhaustive list, just an overview. See the DMO's website for a full one: see the link and picture below.



https://www.dmo.gov.uk/data/gilt-market/gilts-in-issue/

wmb194

simon_or said:

wmb194 said:

crisis_management said:

Does anyone have any experience in buying T-Bills? The yields look attractive, but I'm a complete novice here.

Gilts appear to have better yields at the moment and the ones you can buy below par will offer mostly tax-free returns (they're exempt from CGT).

If par is £100 and I buy below par at say £90 and hold it to maturity, the interest I get along the way is taxable but the gain of £10 is tax free?

Correct. This is true with all, 'qualifying bonds*' so also includes corporate bonds.

Edit: On the flip side, capital losses from qualifying bonds cannot be offset against gains that are taxable.

*As far as I can tell you'll have a hard time finding a listed bond that doesn't qualify but YMMV.