Why do gilts mature at the weekend?

DRS1

Probably no help to you but I used the proceeds of TG25 to buy another gilt on Monday (after 2pm).  This was with HL and I am not sure if they let you buy with funds which haven't cleared yet - I suspect they do.

aroominyork

InvesterJones said:

I had the same bond with HL and iWeb. Funds weren't there at the very start of Monday. They appeared in HL the soonest, and were withdrawn* and in my current account very quickly, certainly before the end of the working day. They also appeared same day on iWeb and I could use it to buy another bond the same day (ie well before 16.30). Withdrawing some leftover funds on iWeb at the end of the day they appeared in my current account a couple of days later.

HL credit your current account same day if the withdrawal request is made before midday, so that means the gilt funds were cleared before midday - that is useful to know. Re iWeb, ii also let you buy with pending funds (I bought TN28 on Monday morning) so that probably doesn't clarify when iWeb said the funds were cleared.

DRS1 said:

Probably no help to you but I used the proceeds of TG25 to buy another gilt on Monday (after 2pm).  This was with HL and I am not sure if they let you buy with funds which haven't cleared yet - I suspect they do.

Yes, I think they do, but InvesterJones' experience suggests the funds were cleared by HL before midday - and perhaps as soon as they were credited... it would be great if anyone knows whether HL shows them as cleared at the same time they are credited.

masonic

It's an old experience and not quite the same, but I remember ii imposing a cheque clearing cycle on an ISA transfer in from another provider before allowing the money to be invested. Which is harsher than other providers.

aroominyork

It feels like ii are pulling a fast one which they should be pulled up on. First step: I have dropped a line to the DMO to ask if they would ever transfer uncleared funds to an investment platform on maturity of a gilt.

aroominyork

DMO replied comprehensively: "Gilts can either be held directly (on the gilts register) or via an intermediary. When an interest or redemption payment is made, HM Treasury has a payment obligation to the direct registered holder on the relevant due date.  These payments can be made via BACS, into the CREST system (the central securities depository for the UK) or by cheque. For BACS payments, cleared funds are paid into the bank account nominated by the registered holder. For CREST payments, funds are normally credited to the CREST account of the legal holder in the morning and use of these funds outside of CREST depends on the arrangements the holder has with their settlement bank.  Similarly, any onward distribution of payment funds by intermediaries to their clients will depend on the arrangements between the parties involved."

That means I would have to find out whether Treasury pay ii by BACS or CREST, and that's where we reach "life's too short - let it rest". 

Hoenir

CREST uses BACS. End of the day the cash has to pass through the bank clearing system to reach the designated bank account. 

SnowMan

Looking at the current index linked gilts then there are a range of days of the week on which the gilts mature. T38 the ILG that was issued this week reaches redemption on a Saturday. But of the 35 ILGs currently in issue, Wednesday is the most popular day of the week for redemption day to fall on.

  

If we look at conventional gilts in issue, then there are a mix of days on which the day of redemption falls, and interestingly (or not) not many have a Saturday redemption date.

aroominyork

SnowMan said:

Looking at the current index linked gilts then there are a range of days of the week on which the gilts mature. T38 the ILG that was issued this week reaches redemption on a Saturday. But of the 35 ILGs currently in issue, Wednesday is the most popular day of the week for redemption day to fall on.

  

If we look at conventional gilts in issue, then there are a mix of days on which the day of redemption falls, and interestingly (or not) not many have a Saturday redemption date.

Nominal gilts mature on the 7th, 22nd or 31th of the month (see https://www.dividenddata.co.uk/uk-gilts-prices-yields.py) so I guess the date tail wags the day of the week dog. 

aroominyork

Hoenir said:

CREST uses BACS. End of the day the cash has to pass through the bank clearing system to reach the designated bank account. 

Are you saying that even if Treasury uses CREST, the funds will be cleared by the time they reach Interactive Investor? And that ii has no excuse not to give customers cleared funds?

wmb194

aroominyork said:

Hoenir said:

CREST uses BACS. End of the day the cash has to pass through the bank clearing system to reach the designated bank account. 

Are you saying that even if Treasury uses CREST, the funds will be cleared by the time they reach Interactive Investor? And that ii has no excuse not to give customers cleared funds?

It'll be the same as dividend and interest payments i.e. the money will be in the right place first thing in the morning. This is all just the usual* broker shenanigans to rip off their customers a day or two's interest. 

The problem is that if you look in brokers' T&Cs they always give themselves at least five working days to credit your account with distributions and they'll just hide behind that.

*To be fair, some are a lot better than others. To date CMC Invest has a 100% record of crediting dividends on the due date by the time I normally log in at c.6am.