Retail investors invited to participate in UK Gilts auction from end of month

poseidon1

https://uk.finance.yahoo.com/news/gilts-opened-retail-investors-treasury-115655295.html

Not sure if anyone seen this news today.

Given that only a tiny minority of investment platform retail investors actively purchase individual government gilts, one does wonder at the level of new business the Treasury believe they will garner by opening the auctions to this cohort.

Smacks of  scraping the barrel for new money from my perspective. That said, will keep an eye out on both platforms quoted in the article, to see how this access  will be offered in practice.

Hoenir

Gilts used to freely available to purchase by retail investors. Was a shame when the avenue was closed. Suspect that the demand fell as collective vehicles attracted the bulk of business. 

The BOE commenced Quantative Tightening in February 2022.  All the corporate bonds on the balance sheet have been sold back into the market since. Gilts are being rolled off at a rate of around £8 billion a month. At current market value still some £550 billion to go. 

Makes sense to open all avenues again to create a fluid market. Worth mentioning that low coupon Gilts aren't liable to Capital Gains Tax on maturity. These can make great investments for some retail investors to minmise their tax bills. While generating a decent guaranteed return. 

Hoenir

JamesRobinson48 said:

So 4% p.a. for 7 years might be a minority taste in our circles.

If you hold the opinion that inflation will fall in the years ahead and as a result deposit interest rates. Might be an attractive option for some investors to park some of their money. 

Hoenir

JamesRobinson48 said:

Hoenir said:

JamesRobinson48 said:

So 4% p.a. for 7 years might be a minority taste in our circles.

If you hold the opinion that inflation will fall in the years ahead and as a result deposit interest rates. Might be an attractive option for some investors to park some of their money. 

Entirely correct. But then again, as a higher rate taxpayer, if I wanted a 7 year gilt for my GIA I'd sooner go for TG31 (coupon 0.25% p.a.) which is trading at a price of £76.13 just now.  So I could pick up a £23.87 capital gain tax free on redemption. Instead of paying all that income tax each year on a 4% coupon. I know the respective modified durations of these two instruments are somewhat dissimilar.

You'd imagine that this is part of a much larger and wider rollout planned for the future. Start on a small scale and work through the teething problems. Gilts on the BOE balance sheet might achieve better prices through retail offerings than being auctioned to institutional holders. 

wmb194

poseidon1 said:

https://uk.finance.yahoo.com/news/gilts-opened-retail-investors-treasury-115655295.html

Not sure if anyone seen this news today.

Given that only a tiny minority of investment platform retail investors actively purchase individual government gilts, one does wonder at the level of new business the Treasury believe they will garner by opening the auctions to this cohort.

Smacks of  scraping the barrel for new money from my perspective. That said, will keep an eye out on both platforms quoted in the article, to see how this access  will be offered in practice.

That story is strange as I saw it reported as Hargreaves Lansdown wanting to offer it because it's seen a huge uptick in demand from retail investors in gilts. Judging by the number of threads on gilts in recent months anecdotally it makes sense. They've often been titled to the low coupon, most of the gain being tax free though.

NS&I is also used as an alternative to issuing gilts and a way to tap retail money.