UK Treasury Gilt 4.75% 2035 new issue open for applications

topyam

Suppose I'm new to gilts, and don't really know much about them. Wondering if they're worth considering now.

Ciprico

Is there any reason to think the actual price would be much different to an existing 10 year gilt..?

aroominyork

Ciprico said:

Is there any reason to think the actual price would be much different to an existing 10 year gilt..?

The yield will be very similar to existing ten year gilts. Looking at the two gilts below, the prices are very different to reflect how much of the return comes from the coupon and how much from the capital gain. So with a coupon of 4.75%, very similar to the existing yield on a ten year gilt, the launch price will be close to par of £100.

InvesterJones

topyam said:

Suppose I'm new to gilts, and don't really know much about them. Wondering if they're worth considering now.

If you're new to them and don't really know much about them then no, avoid. Always keep to what you understand.

OldScientist

topyam said:

Suppose I'm new to gilts, and don't really know much about them. Wondering if they're worth considering now.

While there is plenty of material out there to learn about gilts/bonds, the basics are:
£100 invested in this particular gilt will (roughly - I've assume the price will be 100 at auction)
1) provide £4.75 interest per year (paid in two installments 6 months apart)
2) Return £100 to you in 2035.

However, the price of the gilt between now and 2035 is unknown and unknowable. For example, if future yields fall below the coupon (4.75%) then the price will be higher than 100, while if yields rise above the coupon, then the price will be lower than 100. It is quite possible that the price will remain below (or above) 100 for the entire life of the gilt until maturity.

poseidon1

topyam said:

Suppose I'm new to gilts, and don't really know much about them. Wondering if they're worth considering now.

TBH judging from some of your previous posts you don't seem that engaged in trying to understand the investment world in general, seemingly preferring a buy and forget approach to investing.

UK government gilts are very much at the lower end of investment risk, especially the fixed return gilts with interest paid twice a year until their redemption date ( in this case 2035 ). 

However they do require a degree of personal research to understand how they can fit in with your long term objectives. Posters here can give you some headline pointers but there really is no replacement for personal learning and commitment to that task.

Cus

If there is a drive to attract retail bidders then the cynic in me reckons that institutional bidders value it less

poseidon1

Cus said:

If there is a drive to attract retail bidders then the cynic in me reckons that institutional bidders value it less

We retail applicants don't get a look in where pricing is concern ( we are a tiny drop in the ocean).  The institutional syndicate will set the bid price, which I am hoping will be a shade under face value.

phlebas192

poseidon1 said:

Cus said:

If there is a drive to attract retail bidders then the cynic in me reckons that institutional bidders value it less

We retail applicants don't get a look in where pricing is concern ( we are a tiny drop in the ocean).  The institutional syndicate will set the bid price, which I am hoping will be a shade under face value.

Indeed, this is worth emphasising. With a syndicated launch like this issue, retail investors are simply being offered the opportunity to purchase at the price agreed with the syndicate. For issues where the price is determined by a competitive auction, retail investors pay a price equivalent to the volume weighted average of the successful bids. In both cases, retail investors contribute a tiny portion of the overall value raised and have absolutely no influence on the average cost to the government.

As small time retail investors, we should welcome the opportunity to "get in" at the same prices as the institutions pay. This is undoubtedly a "good thing" which wasn't available to us even a few years ago.

poseidon1

phlebas192 said:

poseidon1 said:

Cus said:

If there is a drive to attract retail bidders then the cynic in me reckons that institutional bidders value it less

We retail applicants don't get a look in where pricing is concern ( we are a tiny drop in the ocean).  The institutional syndicate will set the bid price, which I am hoping will be a shade under face value.

Indeed, this is worth emphasising. With a syndicated launch like this issue, retail investors are simply being offered the opportunity to purchase at the price agreed with the syndicate. For issues where the price is determined by a competitive auction, retail investors pay a price equivalent to the volume weighted average of the successful bids. In both cases, retail investors contribute a tiny portion of the overall value raised and have absolutely no influence on the average cost to the government.

As small time retail investors, we should welcome the opportunity to "get in" at the same prices as the institutions pay. This is undoubtedly a "good thing" which wasn't available to us even a few years ago.

Agreed, a most welcome development to be able to ride on the coat tails of deep pocketed institutional investors.