Index-linked gilt ladder

hallmark

I have some soon to mature ISLCs.  Due to the changes in conditions (no withdrawals allowed) I'm intending to ditch these & build an index-linked gilt ladder instead.

IIUC this is superior in most ways:  no restrictions on withdrawing (cashing in), linked to RPI not CPI currently, and very tax-effective even if held in a GIA.

Possible downsides I can see are: Slightly more hassle but not much in purchasing them, the fact that if they're cashed in early you're not guaranteed to get full price, and the fact that unlike the ISLCs, it's theoretically possible to make a loss.

I'm currently looking at purchasing tranches of these, to be held in an Iweb GIA

0 1/8% Index-linked Treasury Gilt 2026 GB00BYY5F144

1¼% Index-linked Treasury Gilt 2027 GB00B128DH60

0 1/8% Index-linked Treasury Gilt 2028 GB00BZ1NTB69

0 1/8% Index-linked Treasury Gilt 2029 GB00B3Y1JG82

0 1/8% Index-linked Treasury Gilt 2031 GB00BNNGP551

Does that all sound sensible or am I misunderstanding anything?

Thanks

coyrls

You can't ignore the price you are paying for the gilts.  If you are buying at a price over par, then you can still make a real loss on maturity.

DRS1

Do let us know if you get a price for the ILGs straight away or whether you have to leave an order to be filled later.  I think that with Iweb gilts tend to be in the "leave an order" category which means you don't know the price you will pay until you have paid it.

I also assume you know the price shown in the yieldgimp listing is not the price you actually pay.  The price you pay will include inflation to date plus accrued interest.  The extra can come as a nasty shock if you are not expecting it.

OldScientist

Handily on yieldgimp, the net price column (which includes indexation and accumulated interest) is the price you'll actually pay (there will be a small* a bid-ask spread)

* how small depends on the liquidity of the gilt (best not to buy too close to market open or close)

DRS1

OldScientist said:

Handily on yieldgimp, the net price column (which includes indexation and accumulated interest) is the price you'll actually pay (there will be a small* a bid-ask spread)

* how small depends on the liquidity of the gilt (best not to buy too close to market open or close)

Ah yes.  I was talking about the Approx Price column and skipped over the Net Price one.
When you are looking at the prices quoted on eg Iweb it is the Approx Price figure which shows up.

hallmark

Placed my first ILG order today with Iweb & since people expressed an interest here's the details:

Bought £25k T29
Last Traded price on II was £0.9848
Yieldgimp showed net price of 162.78
Trade went through at 163.2565p

For those not aware, Iweb display these holdings based on the valuation of the clean price (approx £15090) meaning I instantly appear to be nearly £10k down.  I knew it would appear like that but I imagine it might surprise/annoy some people.

GeoffTF

If you look at the trades on the London Stock Exchange website, you should be able to find yours and compare it with other trades at about the same time.

hallmark

Oh yeah! looks like I paid more than anybody else today, not sure if that's due to volume, platform, something else or just poor timing?

SnowMan

hallmark said:

Placed my first ILG order today with Iweb & since people expressed an interest here's the details:

Bought £25k T29
Last Traded price on II was £0.9848
Yieldgimp showed net price of 162.78
Trade went through at 163.2565p

For those not aware, Iweb display these holdings based on the valuation of the clean price (approx £15090) meaning I instantly appear to be nearly £10k down.  I knew it would appear like that but I imagine it might surprise/annoy some people.

Here's my chart for that index linked gilt based on Friday's closing clean price of £98.45, showing the breakdown of the real return of just over 0.5%pa. Note the coupons and accrued interest are too small to be seen on the scaled chart on the right.

When you say the trade went through at 163.2565p bear in mind that Halifax/iweb from my experience initially show the traded price as the clean price plus the indexation, but excluding the accrued interest. Of course you get charged for the accrued interest but it's just that you don't see the accrued interest amount until you get the contract note in the next few days.

GeoffTF

hallmark said:

Oh yeah! looks like I paid more than anybody else today, not sure if that's due to volume, platform, something else or just poor timing?

What were the trades placed shortly before and after yours? If you look at the chart, you should be able to hazard a guess as to the buying and selling prices around that time. Also look at the size of the trades, small trades can get a poor deal, because they are not worth the market maker's trouble.

GeoffTF

SnowMan said:

When you say the trade went through at 163.2565p bear in mind that Halifax/iweb from my experience initially show the traded price as the clean price plus the indexation, but excluding the accrued interest. Of course you get charged for the accrued interest but it's just that you don't see the accrued interest amount until you get the contract note in the next few days.

With iWeb, in my experience, if the accrued interest is not shown, it is Net Total Due – Consideration – Commission. iWeb will always show the total net due for a trade. It will also show the number of units that you have bought and the price that you paid per unit. The Consideration is the latter two multiplied together.