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UK STRIPS - how to calculate the correct price / return

I've seen a UK STRIP priced at £92.80 and maturing in March next year. To my novice eye, this would appear to offer an 7.2% return in under a year, which I appreciate can't be correct. The website says: 

Index linked gilts are bought and sold at an 'inflation adjusted price'. If you own an index linked gilt issued after 2005 you won't be able to see a price adjusted for inflation, so the prices shown might not reflect the true value. 

I'd be grateful for any help in clarifying why I can't for example purchase £100k nominal for £92,800 then receive £100k back at maturity.

Also, any help to work out what the actual price might be would be appreciated

Thanks

Comments

  • masonic
    masonic Posts: 25,475 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 15 April 2024 at 7:59PM
    Was it either of the bottom two in this table? (pricing is at close 12/04/2024)

  • Yes, the last one there (GB0030884786) - may I ask which platform you're used to get this info? Seems exactly what I'm looking for.
  • Johnjdc
    Johnjdc Posts: 375 Forumite
    Ninth Anniversary 100 Posts Name Dropper
    Strips are taxable by the way, just FYI. If your reason for buying strip rather than a regular gilt is to convert your gain to capital, it doesn't work.
  • masonic
    masonic Posts: 25,475 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Yes, the last one there (GB0030884786) - may I ask which platform you're used to get this info? Seems exactly what I'm looking for.
    The site is Tradeweb. You can sign up for a free account at https://reports.tradeweb.com/account/login/
  • Thanks to you both - much appreciated!
  • Johnjdc said:
    Strips are taxable by the way, just FYI. If your reason for buying strip rather than a regular gilt is to convert your gain to capital, it doesn't work.
    @Johnjdc

    Thanks for this pointer - hadn't appreciated that. 

    Are there any other pitfalls I should look out for? Does this one qualify as a 'conventional' gilt and thus exempt from CGT?

    Treasury 0.625% 07/06/25 (BK5CVX0)

    Thanks again, really appreciate your time


  • Johnjdc
    Johnjdc Posts: 375 Forumite
    Ninth Anniversary 100 Posts Name Dropper
    Yeah, low coupon is fine, and the indexation element is always tax free. Zero coupon (if artificially achieved via strip - the government could in theory issue 0% though in reality I don't think has ever gone below 0.125%) is not.
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