Anyone buying gilts right now?

Bravepants

GeoffTF said:

I bought a chunk of TG36 today. It is only about 2% of my portfolio though. It does not change my overall bond percentage. Equities have been rising and bonds falling recently, so selling equities to buy bonds could make sense as a rebalancing measure.

Hi, is the one you bought:

https://www.investments.lloydsbank.com/bonds-and-gilts-centre/details/?csid=50713887

Can you please say why did you bought this? It's got quite low yield. Are you basing your purchase on the fact that the bond will redeem at £100 in 2036? That would make the yield about 1.4%.

There are gilts with yields of 4% or higher, for example T4Q:

https://www.hl.co.uk/shares/shares-search-results/t/treasury-4.25-07032036-gilt

Sorry, I'm just curious because I have been thinking of buying one at some point. Maybe I've misunderstood something?

OldScientist

Bravepants said:

GeoffTF said:

I bought a chunk of TG36 today. It is only about 2% of my portfolio though. It does not change my overall bond percentage. Equities have been rising and bonds falling recently, so selling equities to buy bonds could make sense as a rebalancing measure.

Hi, is the one you bought:

https://www.investments.lloydsbank.com/bonds-and-gilts-centre/details/?csid=50713887

Can you please say why did you bought this? It's got quite low yield. Are you basing your purchase on the fact that the bond will redeem at £100 in 2036? That would make the yield about 1.4%.

There are gilts with yields of 4% or higher, for example T4Q:

https://www.hl.co.uk/shares/shares-search-results/t/treasury-4.25-07032036-gilt

Sorry, I'm just curious because I have been thinking of buying one at some point. Maybe I've misunderstood something?

Just to chip in. TG36 is an inflation linked gilt and has a yield of 1.4% (as you correctly state). But note that it is a real yield, so annualised inflation of (say) 3% between now and maturity in 2036 will have given a nominal yield of 4.4%. According to yieldgimp.com, the breakeven inflation is currently around 3.6%, which means if inflation between now and 2036 is higher than 3.6% the inflation linked gilt will have performed better than the equivalent nominal gilt, whereas the opposite will be true if inflation is lower than 3.6%. Of course, which will have performed better will only be known in 2036!

Bravepants

OldScientist said:

Bravepants said:

GeoffTF said:

I bought a chunk of TG36 today. It is only about 2% of my portfolio though. It does not change my overall bond percentage. Equities have been rising and bonds falling recently, so selling equities to buy bonds could make sense as a rebalancing measure.

Hi, is the one you bought:

https://www.investments.lloydsbank.com/bonds-and-gilts-centre/details/?csid=50713887

Can you please say why did you bought this? It's got quite low yield. Are you basing your purchase on the fact that the bond will redeem at £100 in 2036? That would make the yield about 1.4%.

There are gilts with yields of 4% or higher, for example T4Q:

https://www.hl.co.uk/shares/shares-search-results/t/treasury-4.25-07032036-gilt

Sorry, I'm just curious because I have been thinking of buying one at some point. Maybe I've misunderstood something?

Just to chip in. TG36 is an inflation linked gilt and has a yield of 1.4% (as you correctly state). But note that it is a real yield, so annualised inflation of (say) 3% between now and maturity in 2036 will have given a nominal yield of 4.4%. According to yieldgimp.com, the breakeven inflation is currently around 3.6%, which means if inflation between now and 2036 is higher than 3.6% the inflation linked gilt will have performed better than the equivalent nominal gilt, whereas the opposite will be true if inflation is lower than 3.6%. Of course, which will have performed better will only be known in 2036!

Aha! I see. Thanks for that.

GeoffTF

OldScientist said:

Bravepants said:

GeoffTF said:

I bought a chunk of TG36 today. It is only about 2% of my portfolio though. It does not change my overall bond percentage. Equities have been rising and bonds falling recently, so selling equities to buy bonds could make sense as a rebalancing measure.

Hi, is the one you bought:

https://www.investments.lloydsbank.com/bonds-and-gilts-centre/details/?csid=50713887

Can you please say why did you bought this? It's got quite low yield. Are you basing your purchase on the fact that the bond will redeem at £100 in 2036? That would make the yield about 1.4%.

There are gilts with yields of 4% or higher, for example T4Q:

https://www.hl.co.uk/shares/shares-search-results/t/treasury-4.25-07032036-gilt

Sorry, I'm just curious because I have been thinking of buying one at some point. Maybe I've misunderstood something?

Just to chip in. TG36 is an inflation linked gilt and has a yield of 1.4% (as you correctly state). But note that it is a real yield, so annualised inflation of (say) 3% between now and maturity in 2036 will have given a nominal yield of 4.4%. According to yieldgimp.com, the breakeven inflation is currently around 3.6%, which means if inflation between now and 2036 is higher than 3.6% the inflation linked gilt will have performed better than the equivalent nominal gilt, whereas the opposite will be true if inflation is lower than 3.6%. Of course, which will have performed better will only be known in 2036!

Those are the numbers within a tax free fund. I have always maxed out on those. My holding is outside any tax shelter. I pay tax on only the 0.125% (which is index linked). Most of my nominal return will be as a capital gain, which is tax free for gilts. There are some conventional gilts with low coupons, but they are all short dated. Allowing for tax, my break even inflation will be much lower than 3.6%.

Alexland

[Deleted User] said:

https://www.yieldgimp.com/

Do I dare click that link on a work computer?

m_c_s

Alexland said:

[Deleted User] said:

https://www.yieldgimp.com/

Do I dare click that link on a work computer?

Is that because of a virus or Starmer and Reeves crashing the economy. Gilts just tanked again today!

InvesterJones

m_c_s said:

Alexland said:

[Deleted User] said:

https://www.yieldgimp.com/

Do I dare click that link on a work computer?

Is that because of a virus or Starmer and Reeves crashing the economy. Gilts just tanked again today!

10yr yield has increased a tiny amount today. Hardly tanking.

Alexland

m_c_s said:
Gilts just tanked again today!

Looking at VGOV it's only down 0.18% so far today. I'm more concerned with asking a gimp to yield.

I don't see how gilts can further tank without very bad things happening.

Hoenir

LHW99 said:

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, 

The lending underwriting criteria should never have been relaxed.  I'm reminded of this

https://www.ianfraser.org/the-worst-bank-in-the-world-hboss-calamitous-seven-year-life/

I was fortunate enough to meet Paul Moore the whstleblower before he died. Gave a fascinatating insight into how maggot ridden the bank was. 

Much the same for another infamous bank. When Northern Rock was placed under the supervision of the UK Treasury. It took them 6 months to get to the bottom of what was going on. Such was the complexity of the financial structure that underpinned the business model. The immediate result was nationalisation. The subsequently published 132 page report was enlightening. How cleverly the business had been engineered and built on leverage. Only when the bank to bank lending market froze following the BNP Paribas disclosure of issues in the USA. Did the house of cards start to implode. 

aroominyork

Alexland said:

m_c_s said:
Gilts just tanked again today!

Looking at VGOV it's only down 0.18% so far today. I'm more concerned with asking a gimp to yield.

I don't see how gilts can further tank without very bad things happening.

VGOV is 5% worse than IGLH, a hedged global bond ETF, since August. Certainly doesn't reflect well on the govt.