Gilt Auction Treasury 4.375% 2028 - closes 12 November with HL

poseidon1

Received an email from  HL with regard to this latest gilt offering.

Possibly of interest to Isa and sipp investors keen to get hold  of a short dated gilt at a clean zero commission price. Hoping it will go for a small discount in the auction.

aroominyork

Not for me (unwrapped low coupons only) but does clean zero commission mean there is no bid/offer spread so you buy at a mid price? 

phlebas192

[Deleted User] said:

poseidon1 said:

Received an email from  HL with regard to this latest gilt offering.

Possibly of interest to Isa and sipp investors keen to get hold  of a short dated gilt at a clean zero commission price. Hoping it will go for a small discount in the auction.

That's a good reason to get you off the marketing lists! I

f you are a taxpayer, how is this going to be better than buying TN28?

OP said "Possibly of interest to Isa and sipp investors". TN28's tax advantages come at a cost and those advantages simply don't exist in an ISA or SIPP making TN28 a poor choice for them. This new gilt should offer a yield to redemption of about 4.3% at today's prices compared to TN28's 4.1%.

PS: AJ Bell are also offering this gilt via the auction.

poseidon1

phlebas192 said:

[Deleted User] said:

poseidon1 said:

Received an email from  HL with regard to this latest gilt offering.

Possibly of interest to Isa and sipp investors keen to get hold  of a short dated gilt at a clean zero commission price. Hoping it will go for a small discount in the auction.

That's a good reason to get you off the marketing lists! I

f you are a taxpayer, how is this going to be better than buying TN28?

OP said "Possibly of interest to Isa and sipp investors". TN28's tax advantages come at a cost and those advantages simply don't exist in an ISA or SIPP making TN28 a poor choice for them. This new gilt should offer a yield to redemption of about 4.3% at today's prices compared to TN28's 4.1%.

PS: AJ Bell are also offering this gilt via the auction.

Expressed in terms of physical cash returned to March 2028 on say an investment of £10,000, the half year coupons  on the 4.375% 2028 new issue would total £2,761.56 ( tax free in  isa or sipp) and then return of capital.

TN28 by contrast if purchased near the current offer price of £88.27 would cost £8,827 ( plus commision) to return a tax exempt profit of around £1,173 at redemption in January 2028.  So even for a 40% tax payer TN28 not quite the no brainer it appears.

If held unwrapped, the 4.375% gilt is probably best compared to a 3 year fixed rate deposit account the best of which currently pay 4.6%. Similarly for 3 year cash isas the best seems to be 4.65% (Paragon).
However, the Gilt does have the option of penalty free  'instant access', compared to the significant penalties levied on fixed interest accounts if you want to get out early.

poseidon1

aroominyork said:

Not for me (unwrapped low coupons only) but does clean zero commission mean there is no bid/offer spread so you buy at a mid price? 

No commision on new gilt issues. Since this is an auction, there is a possibility of buying at a discount.  Discount will ultimately depend on institutional bids for the £4,000 million on offer. The deeper the discount, the better the opportunities for a profit on the capital outlay in addition to the coupons. 

That said, there is also possibility of it trading under par on 1st day trading. No big deal if intend to hold to redemption, but not a sure bet if interested in 'stagging'  for a quick tax free profit.

zagfles

poseidon1 said:

phlebas192 said:

[Deleted User] said:

poseidon1 said:

Received an email from  HL with regard to this latest gilt offering.

Possibly of interest to Isa and sipp investors keen to get hold  of a short dated gilt at a clean zero commission price. Hoping it will go for a small discount in the auction.

That's a good reason to get you off the marketing lists! I

f you are a taxpayer, how is this going to be better than buying TN28?

OP said "Possibly of interest to Isa and sipp investors". TN28's tax advantages come at a cost and those advantages simply don't exist in an ISA or SIPP making TN28 a poor choice for them. This new gilt should offer a yield to redemption of about 4.3% at today's prices compared to TN28's 4.1%.

PS: AJ Bell are also offering this gilt via the auction.

Expressed in terms of physical cash returned to March 2028 on say an investment of £10,000, the half year coupons  on the 4.375% 2028 new issue would total £2,761.56 ( tax free in  isa or sipp) and then return of capital.

TN28 by contrast if purchased near the current offer price of £88.27 would cost £8,827 ( plus commision) to return a tax exempt profit of around £1,173 at redemption in January 2028.  So even for a 40% tax payer TN28 not quite the no brainer it appears.

If held unwrapped, the 4.375% gilt is probably best compared to a 3 year fixed rate deposit account the best of which currently pay 4.6%. Similarly for 3 year cash isas the best seems to be 4.65% (Paragon).
However, the Gilt does have the option of penalty free  'instant access', compared to the significant penalties levied on fixed interest accounts if you want to get out early.

No it wouldn't. 4.375% is the annual coupon, not the half yearly coupon! You'd get £1449 (so £869 after tax if a 40% taxpayer & held unwrapped). 

poseidon1

zagfles said:

poseidon1 said:

phlebas192 said:

[Deleted User] said:

poseidon1 said:

Received an email from  HL with regard to this latest gilt offering.

Possibly of interest to Isa and sipp investors keen to get hold  of a short dated gilt at a clean zero commission price. Hoping it will go for a small discount in the auction.

That's a good reason to get you off the marketing lists! I

f you are a taxpayer, how is this going to be better than buying TN28?

OP said "Possibly of interest to Isa and sipp investors". TN28's tax advantages come at a cost and those advantages simply don't exist in an ISA or SIPP making TN28 a poor choice for them. This new gilt should offer a yield to redemption of about 4.3% at today's prices compared to TN28's 4.1%.

PS: AJ Bell are also offering this gilt via the auction.

Expressed in terms of physical cash returned to March 2028 on say an investment of £10,000, the half year coupons  on the 4.375% 2028 new issue would total £2,761.56 ( tax free in  isa or sipp) and then return of capital.

TN28 by contrast if purchased near the current offer price of £88.27 would cost £8,827 ( plus commision) to return a tax exempt profit of around £1,173 at redemption in January 2028.  So even for a 40% tax payer TN28 not quite the no brainer it appears.

If held unwrapped, the 4.375% gilt is probably best compared to a 3 year fixed rate deposit account the best of which currently pay 4.6%. Similarly for 3 year cash isas the best seems to be 4.65% (Paragon).
However, the Gilt does have the option of penalty free  'instant access', compared to the significant penalties levied on fixed interest accounts if you want to get out early.

No it wouldn't. 4.375% is the annual coupon, not the half yearly coupon! You'd get £1449 (so £869 after tax if a 40% taxpayer & held unwrapped). 

Considerable embarrassment here. Even more so because I double checked my figures! Been retired too long methinks.

aroominyork

poseidon1 said:

zagfles said:

poseidon1 said:

phlebas192 said:

[Deleted User] said:

poseidon1 said:

Received an email from  HL with regard to this latest gilt offering.

Possibly of interest to Isa and sipp investors keen to get hold  of a short dated gilt at a clean zero commission price. Hoping it will go for a small discount in the auction.

That's a good reason to get you off the marketing lists! I

f you are a taxpayer, how is this going to be better than buying TN28?

OP said "Possibly of interest to Isa and sipp investors". TN28's tax advantages come at a cost and those advantages simply don't exist in an ISA or SIPP making TN28 a poor choice for them. This new gilt should offer a yield to redemption of about 4.3% at today's prices compared to TN28's 4.1%.

PS: AJ Bell are also offering this gilt via the auction.

Expressed in terms of physical cash returned to March 2028 on say an investment of £10,000, the half year coupons  on the 4.375% 2028 new issue would total £2,761.56 ( tax free in  isa or sipp) and then return of capital.

TN28 by contrast if purchased near the current offer price of £88.27 would cost £8,827 ( plus commision) to return a tax exempt profit of around £1,173 at redemption in January 2028.  So even for a 40% tax payer TN28 not quite the no brainer it appears.

If held unwrapped, the 4.375% gilt is probably best compared to a 3 year fixed rate deposit account the best of which currently pay 4.6%. Similarly for 3 year cash isas the best seems to be 4.65% (Paragon).
However, the Gilt does have the option of penalty free  'instant access', compared to the significant penalties levied on fixed interest accounts if you want to get out early.

No it wouldn't. 4.375% is the annual coupon, not the half yearly coupon! You'd get £1449 (so £869 after tax if a 40% taxpayer & held unwrapped). 

Considerable embarrassment here. Even more so because I double checked my figures! Been retired too long methinks.

Your last employer might disagree.

Ciprico

I'm with HL and didn't receive this email, nor can I find details on their website...

Could you post a link...?

Ciprico

I read you're not guaranteed to pay £100 per gilt, so all the calculations above are speculative....?


"The price is determined during a competitive auction process managed by the Debt Management Office (DMO) on behalf of HM Treasury. You will receive the average accepted price which may be above £100 per gilt or £1 per unit"

gravel_2

Ciprico said:

I read you're not guaranteed to pay £100 per gilt, so all the calculations above are speculative....?


"The price is determined during a competitive auction process managed by the Debt Management Office (DMO) on behalf of HM Treasury. You will receive the average accepted price which may be above £100 per gilt or £1 per unit"

Price is driven by market participants. £100 is only the nominal value. If the market wants a higher % yield then a lower average bid will win, likewise if Government debt is in high demand the price might be above £100. You can see past auction results here: https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D2.1A