The flaw in my Gilt logic
valiant24
Forumite Posts: 364
Forumite
Would someone please be able to indicate where I have gone wrong below?
I just bought 10,112 T24 gilts (UNITED KINGDOMGOVERNMENT OF 2.75 GILT SNR BDS 09/24 GBP1000 REGS).
"Consideration" was (10112 x 97.668) = £9,876.19
With £5 commission, the actual price I paid was £9,999.07. I think that reflects that a dirty price was paid as interest is due soon.
All good.
Now, I will get (0.275% x 10112)=£278.08 interest on 30/09/23, 31/03/24 and 30/09/24.
So that's a total of (3x278.08)=£834.24 interest. I'll also get £10,112 capital back on 30/09/23, so a total return of (824.24+10112)=£10964.24.
(109649999.075)=£952.17 "profit", or about 9.5% in just over 13 months.
That can't be right, can it?!
I just bought 10,112 T24 gilts (UNITED KINGDOMGOVERNMENT OF 2.75 GILT SNR BDS 09/24 GBP1000 REGS).
"Consideration" was (10112 x 97.668) = £9,876.19
With £5 commission, the actual price I paid was £9,999.07. I think that reflects that a dirty price was paid as interest is due soon.
All good.
Now, I will get (0.275% x 10112)=£278.08 interest on 30/09/23, 31/03/24 and 30/09/24.
So that's a total of (3x278.08)=£834.24 interest. I'll also get £10,112 capital back on 30/09/23, so a total return of (824.24+10112)=£10964.24.
(109649999.075)=£952.17 "profit", or about 9.5% in just over 13 months.
That can't be right, can it?!
0
Comments

The 2.75% coupon is an annual rate. Each halfyearly coupon payment will be half of 2.75% x 10,112 = £139.040

As per Cold_comfort. I make it a 5.3% return over the 13 months. Sharecast.com puts the annualised gross redemption yield at 5.06% which sounds about right. And not great value when you can get 6% from a retail oneyear deposit (albeit without the ability to sell during the term, possibly at a capital loss) or 5.7% from a oneyear cash ISA.0

Cold_comfort said:The 2.75% coupon is an annual rate. Each halfyearly coupon payment will be half of 2.75% x 10,112 = £139.040
Categories
 All Categories
 338.8K Banking & Borrowing
 248.6K Reduce Debt & Boost Income
 447.5K Spending & Discounts
 230.7K Work, Benefits & Business
 600.7K Mortgages, Homes & Bills
 171K Life & Family
 243.9K Travel & Transport
 1.5M Hobbies & Leisure
 15.9K Discuss & Feedback
 15.1K Coronavirus Support Boards