Sanity check this gilt purchase

hallmark

I have bought individual gilts before but only within an AJ Bell SIPP.

Basically am looking for somewhere to park some savings cash.  Currently maxed out ISA contributions and am a higher rate taxpayer who's already above the £500 interest mark so am intending to purchase an individual gilt to minimise the tax liability but just wanted to sanity check my logic in case I've misunderstood anything.

Purchase amount will probs be £20K and am intending to buy either T26 or TN28 both of which pay a coupon of 0.125%. The purchase will be from a GIA with Iweb.

IIUC:

The purchase price will be £0.96 "ish" or £0.88 "ish" respectively and most of the profit will be when the gilt matures and the cost price returns to par.  Which is not liable to CGT.  Currently the yield is just under/over 4% depending on which Gilt.

The 0.125% coupon would be paid each Jan/Jul and is treated as savings interest for income tax purposes, but would be very low as it's only 0.125%.

My logic is I'll be getting close to 4% tax-free as opposed to more like 3% which is probably the best I'll do in a savings account after tax.

Does that sound correct?

Also I notice if I attempt to place an order with Iweb I get this message (regardless of which Gilt or how much I attempt to purchase)

Negotiated Order

Your order can not be completed automatically

Your order cannot be completed automatically at this time, but can still be submitted as a negotiated order. Reasons for this could include market volatility, the size of 

your order, or because there is not enough electronic stock available to match your order.

Because your order cannot be completed automatically we cannot guarantee the share price at the time of your trade.

Your order will be sent directly to our Dealers who will negotiate the best price available for your order in the market at that time. All orders will be completed in fair 

and due turn as soon as is practically possible.

Once you have placed a negotiated order you do not have the facility to cancel this instruction online.

Does that message always appear with Iweb Gilt purchases?  Is there any reason not to purchase via Iweb (i.e. not sure if the price varies much/at all between Iweb vs AJ Bell or II)


Apologies if any of the terminology above is wrong & many thanks for any help..........

jimjames

I have also tried gilt purchases with iWeb and got exactly the same message regardless of size of order. Your logic sounds correct and I have considered them for the same reason. I probably would have bought by now if the iWeb message hadn't come up but I'm nervous buying without knowing the price (despite doing that all the time with funds!)

Hoenir

Be worth googling a Buying Gilts Guide. Read and gain a fuller understanding. Then asking further questions. 

masonic

jimjames said:

I have also tried gilt purchases with iWeb and got exactly the same message regardless of size of order. Your logic sounds correct and I have considered them for the same reason. I probably would have bought by now if the iWeb message hadn't come up but I'm nervous buying without knowing the price (despite doing that all the time with funds!)

It would discourage me to buy right at the end of the session. I had to place a couple of equities trades like this during the covid crash when markets were disorderly. All went well and I got a contract note about half an hour later.

HL do allow you to get a quote FYI.

DRS1

Gilt Yields

I assume you have seen the yield gimp page above.  That has a useful column showing the equivalent rate for a 40% taxpayer (40% gross equivalent).

You say you want to park some savings in the gilt.  The returns quoted assume you hold to maturity and with the two you have identified most of the returns are at maturity.  Yes you can sell them beforehand and yes the price might be on a trend to par as mentioned above but if you want to cash in early there is no guarantee what price you get and who knows there may be a similar Iweb message to the one you are getting now.

The problem with going the negotiated order route is you just don't know what price you will get.  I did it recently (not with a gilt) and it was quite a difference to the quoted price.  So maybe it is worth testing the waters with a small amount or moving the money to HL if they can do online dealing with a real time price (as @masonic says above) and swallow the extra commission.

InvesterJones

I haven't had an issue with negotiated orders - they tend to go through immediately so unless there's an extreme wobble in price it's pretty close to what you'd expect - it's rare for bond prices to move anything like as quickly as shares but sure, avoid the start and end of sessions for a slightly more stable ride. The price can seem worse than quoted as they report the average price paid including a payment to account for accrued interest (ie dirty price, while quoted price on LSE is the clean price - and delayed). Once I realised that, the prices were at least as good as I was expecting.

valiant24

I've bought many single gilts on iweb over the past few years and invariably get the same message.

The deals are usually done pretty quickly though (within 15 minutes).

Hoenir

DRS1 said:

The problem with going the negotiated order route is you just don't know what price you will get.  I did it recently (not with a gilt) and it was quite a difference to the quoted price. 

Due to the accrued interest.