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5.375% Treasury Gilt 2056
Comments
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DRS1 said:poseidon1 said:DRS1 said:Stupid question but what will it cost?
Can you get £1 nominal for £1?
However my concern given its long duration is the possibility of it either opening at a discount to face value when trading commences or moving to a future discount dependent on perception of the quality of UK sovereign debt going forward.
For contrast TG40 ( Treasury 4 3/8 % 2054) can currently be bought for around 84.54p which converts into a approximate running yield of 5.17% subject to any accrued income at date of purchase.
You did have me worried by the TG40 reference - I thought I could rely on the numbers to represent the maturity year. I think you mean T54 (same nominal yield as TG40 just lasts another 14 years although I am not sure as T54 has a yield of 5.55% but the price is right while TG40 is about 8p more expensive)
Main risk with the new 5.375% gilt is therefore losing a bit of capital if you sell before redemption, but the relatively high guaranteed coupon could be considered compensation for that.1 -
You can buy existing ones at that kind of rate, with a shorter duration, and without having to go into an auction with an unknown price.
UK Gilt Prices and Yields
Look at T45 for instance, offering 5.354% over 20 years if held to maturity.1 -
This caught my eye yesterday as well - I also read the help pages on the II web site and understood that actually, I don't know the price I will be paying in advance, so I don't know what the real rate of return will be, although they insist it will be a "good rate".
However didn't I also read on their help pages that this type of guilt is not traded on the open market so you can't sell it again early, or did I misunderstand that bit?0 -
Nebulous2 said:You can buy existing ones at that kind of rate, with a shorter duration, and without having to go into an auction with an unknown price.
UK Gilt Prices and Yields
Look at T45 for instance, offering 5.354% over 20 years if held to maturity.
Thanks. I will dip my toes in the water and buy a small number to get a feel for how the theory works in practice.
"For every complicated problem, there is always a simple, wrong answer"1 -
k6chris said:Nebulous2 said:You can buy existing ones at that kind of rate, with a shorter duration, and without having to go into an auction with an unknown price.
UK Gilt Prices and Yields
Look at T45 for instance, offering 5.354% over 20 years if held to maturity.
Thanks. I will dip my toes in the water and buy a small number to get a feel for how the theory works in practice.1 -
DRS1 said:k6chris said:Nebulous2 said:You can buy existing ones at that kind of rate, with a shorter duration, and without having to go into an auction with an unknown price.
UK Gilt Prices and Yields
Look at T45 for instance, offering 5.354% over 20 years if held to maturity.
Thanks. I will dip my toes in the water and buy a small number to get a feel for how the theory works in practice.
Yes, a SIPP"For every complicated problem, there is always a simple, wrong answer"0 -
k6chris said:ii are offering " early access to a new conventional gilt" as listed in the title. As someone who has retired, the idea of something that pays over 5% for the next 30 years seems quite appealing. What am I missing???Thanks
Risks:
1) Inflation will decrease the purchasing power of your income and capital
2) UK government default (given the UK has a sovereign currency the chance of this is fairly small, but not zero).
3) Where sale is required before 30 years elapse, if yields are greater than 5.375% at the time of sale the price will be below 100 (conversely, if yields are lower then the price will be higher than 100).
Taking natural yield from a fixed income security is one way of funding a retirement and has the benefit of being very simple to run.
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OldScientist said:
Taking natural yield from a fixed income security is one way of funding a retirement and has the benefit of being very simple to run.
"For every complicated problem, there is always a simple, wrong answer"0 -
You'll need to balance the likely value of your capital in 2056 vs. the increased income from an annuity. Per a recent thread, even a 55-yo would get a higher income from a level annuity than the gilt is paying.N. Hampshire, he/him. Octopus Intelligent Go elec & Tracker gas / Vodafone BB / iD mobile. Ripple Kirk Hill member.
2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 33MWh generated, long-term average 2.6 Os.Not exactly back from my break, but dipping in and out of the forum.Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Best kettle!0 -
QrizB said:You'll need to balance the likely value of your capital in 2056 vs. the increased income from an annuity. Per a recent thread, even a 55-yo would get a higher income from a level annuity than the gilt is paying.
Agree, but the gilt route allows you to revert back to capital (with risk of fluctation based on underlying bond rates) vs an annuity which is a one-way decision. I think that is correct??"For every complicated problem, there is always a simple, wrong answer"0
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