TN25 vs other shorter term gilts - different

ChilliBob

Guys, I hold a few short term Gilts, which I intend to hold to maturity, so I know what I'm in for so to speak. What's odd is when you compare these together, see below:



This is over a 3 year horizon but over 1, 5 etc it's similar. I can see the pattern is basically the same for all minus TN25 - with the volatility being greater the further out the gilt's maturity date is - hence TG31 being the most volatile.

TN25 seems to be far less volatile, I'm just curious why?

Doesn't really make any difference to me, as I say, I hold all minus 31 anyway, just curious really!

Hoenir

Closer to maturity the lower the reaction to noise. 

EthicsGradient

If you look at a graph of yield to maturity, rather than the market price, you'll see the TN25 yield varies in much the same way as the others - 3rd one down here has TN25, TN28 and TG31: Gilt Yields - Charts (yieldgimp.com)
(and note that your graph, which looks like the ii one, is not "3 year", but starting from 10 July 2023. The yieldgimp graph only goes a little further back, to 19th May 2023. )

masonic

Congratulations, you have rediscovered duration risk.

ChilliBob

masonic said:

Congratulations, you have rediscovered duration risk.

Cool? Can I have a sticker please?

Joking aside, yeah, that makes sense. I think probably the issue is the graph, as pointed above it isn't a 3 year horizon at all - despite that being selected in IIs drop down! Should have paid more attention.

Either way it all makes sense now