Anyone buying gilts right now?

incus432

You can buy verious gilt/bond funds of different durations from short term 0-5 yr (ETFs like GLT5, IGLS, UKG5) to longer term like the VGOV/VGVA  (effective duration 9.3 years) right up to over 15 year like GLTL. But none of these behave the same as holding an individual gilt to maturity.  Short term funds are much less volatile and suffered less in the 2022 bond debacle but the gains in yield now are mostly in longer duration.

https://monevator.com/low-cost-index-trackers/

Alexland

granta said:

Is there an ETF that taps into this asset class? Also, how does one search for what to buy on mainstream platforms if buying gilts? Could someone please post a link to an example? [I'm not looking for recommendations as I'm not planning to buy but just wish to improve my understanding]

I tend to lookup VGOV when I want to check how a mixed basket of various duration gilts are performing in the same way I'd lookup SWDA to see how developed world equities are generally performing.

granta

Alexland said:

granta said:

Is there an ETF that taps into this asset class? Also, how does one search for what to buy on mainstream platforms if buying gilts? Could someone please post a link to an example? [I'm not looking for recommendations as I'm not planning to buy but just wish to improve my understanding]

I tend to lookup VGOV when I want to check how a mixed basket of various duration gilts are performing in the same way I'd lookup SWDA to see how developed world equities are performing.

Thanks! I tend to look up VEVE to get an idea of developed world equities as I hold it. Any reason why you favour SWDA over VEVE?

Alexland

granta said:

Thanks! I tend to look up VEVE to get an idea of developed world equities as I hold it. Any reason why you favour SWDA over VEVE?

VEVE is my biggest single holding but SWDA is more liquid so the results of a quick google search of "Lon SWDA" tend to be more accurate for what is going on each day. Also as it's an accumulating ETF it's easy to see the total return over various periods in the quick google graphs.

On that basis I should probably suggest VGVA above VGOV but I find it less memorable so I just type "Lon VGOV" if I want to do a quick search but am aware that the historic data won't include income but I have a pretty good idea what happened to bonds and saw it coming a mile away so don't really need to dwell on past performance.

Hoenir

zagfles said:

Hoenir said:

zagfles said:

MaxiRobriguez said:

Been a while...

I've loaded up on long duration (~20 year gilts) last few weeks. Opportunity to secure a risk free 5+% yield over the long term seemed too good to turn down. Ideally it's a short term hold and I will pivot back to 100% equities in the event of a stock market rout, but if that doesn't happen I'm quite happy holding to maturity.

Can see the appeal of government stoking inflation to reduce debt burden but reality is they'll be booted out of office if inflation ticks upward and remains high.

Just feels like being paid reasonably well to hold what is a net upside opportunity.

Why? As long as peoples' incomes are rising with inflation most won't care, 

Economic reality maybe such that the employer is unable to afford inflation linked payrises. Or indeed retain all existing employees on the payroll. The old saying. When somebody else loses their job it's a recession. When they lose their own it's a depression. 

 Anyway during the GFC inflation went very low and even negative and lots of people lost their jobs.

The GFC didn't really impact the wider economy in the UK. Inflation fell as banks in essence closed their doors to lending. Where we are today is the byproduct of events back then. As with the emergency measures during Covid. The decisions made were to avoid the total collapse of the UK banking system, along with the impact of RBS's overseas operations falling over like a pack of dominoes. 

zagfles

Alexland said:

zagfles said:

High inflation will hurt people with flat annuities, with capped DB pensions, with fixed interest investments like bonds, and it will help people with big debts like a £300k mortgage.

I'd love to only have a £300k mortgage that would be great. An amortization calculation suggests if i didn't make any overpayments it would take me around 250 months to get my balance down to £300k. It's kind of crazy the scale of mortgage I had to take out to keep the house while preserving most of my investment assets. It's a PITA to service the debt while making heavy pension contributions to avoid higher rate tax with the frozen thresholds then getting what little I do have to spend squeezed by inflation. That's why I'm looking at the attractive yield on gilts thinking they are a great way to use a proportion of my investments to cover the liability if I want to retire early in a decade's time.

My parents thought their £8k mortgage in 1970 was ridiculous, at around 8x average earnings. My grandparents thought their (non index linked) pension of £200 a year, on top of their £260 a year state pension, would be a luxury retirement. Most pensioners just had the state pension. Then inflation kicked off. My parents complained about rising prices with 4 kids to feed, but their income was rising and their debt was reducing in real value. We went from what seemed like hand to mouth when I was young to being relatively well off when I was a teenager. Meanwhile my grandparents became effectively reliant on the state pension and very little else. 

But yes back to the point, you can use the attractive yield on flat gilts to cover your mortgage liability without worrying about inflation, while people who use them to cover other liabilities like future spending on day to day living, do need to worry about inflation.  

LHW99

Hoenir said:

zagfles said:

Hoenir said:

zagfles said:

MaxiRobriguez said:

Been a while...

I've loaded up on long duration (~20 year gilts) last few weeks. Opportunity to secure a risk free 5+% yield over the long term seemed too good to turn down. Ideally it's a short term hold and I will pivot back to 100% equities in the event of a stock market rout, but if that doesn't happen I'm quite happy holding to maturity.

Can see the appeal of government stoking inflation to reduce debt burden but reality is they'll be booted out of office if inflation ticks upward and remains high.

Just feels like being paid reasonably well to hold what is a net upside opportunity.

Why? As long as peoples' incomes are rising with inflation most won't care, 

Economic reality maybe such that the employer is unable to afford inflation linked payrises. Or indeed retain all existing employees on the payroll. The old saying. When somebody else loses their job it's a recession. When they lose their own it's a depression. 

 Anyway during the GFC inflation went very low and even negative and lots of people lost their jobs.

The GFC didn't really impact the wider economy in the UK. Inflation fell as banks in essence closed their doors to lending. Where we are today is the byproduct of events back then. As with the emergency measures during Covid. The decisions made were to avoid the total collapse of the UK banking system, along with the impact of RBS's overseas operations falling over like a pack of dominoes. 

That maybe true for the economy generally, but many smaller businesses (particularly in B2B) were significantly affected both by the tightened lending criteria, and by a proportion of their (generally EU) customers falling away. Our business survived, just, but 25% loss of customers had a big effect. Those customers in fact did not in the main return so the customer base had to be rebuilt almost from scratch.

incus432

Alexland said:

granta said:

Thanks! I tend to look up VEVE to get an idea of developed world equities as I hold it. Any reason why you favour SWDA over VEVE?

VEVE is my biggest single holding but SWDA is more liquid so the results of a quick google search of "Lon SWDA" tend to be more accurate for what is going on each day. Also as it's an accumulating ETF it's easy to see the total return over various periods in the quick google graphs.

I hold SWLD - near identical to SWDA and a bit cheaper (TCO 0.12%). As an aside, VHVG is the Acc version of VEVE.

But back to bonds, I am now nervous of longer dated gilt funds. Havent yet worked out a strategy

InvesterJones

granta said:

Am following this thread with interest but I don't have any experience of buying bonds/gilts.

Is there an ETF that taps into this asset class? Also, how does one search for what to buy on mainstream platforms if buying gilts? Could someone please post a link to an example? [I'm not looking for recommendations as I'm not planning to buy but just wish to improve my understanding]

And to add, buying individual gilts on the secondary market is very similar to buying ETFs. You go to your platform of choice that offers them (not all do, but places like HL and iWeb do), and either search on the ISIN, or more practically, the LSE ticker symbol of the gilt you're interested in, like 'TG35' and place an order in the same way you would any other exchange traded order.

Alexland

incus432 said:

As an aside, VHVG is the Acc version of VEVE.

I've been in VEVE for so long now that I don't dare touch it as any messing around could be expensive. Even when buying it I had to do multiple £100k purchases to keep the spread reasonable. I enjoy seeing a few grand of dividends from VEVE every quarter so it's worth the £1.50 to reinvest them and the leftover cash from buying whole units is useful for paying the capped account fee. Although it's not a high yield it's a good reminder that even a global tracker can generate useful income when you hold enough units. I used to challenge myself with how many years I can go without touching it although during the divorce I had to sell some down to satisfy the pension sharing order but but with recent growth I'm back ahead of where I was already.