T35V Gilt

poseidon1

UPDATE:

TR35V now sitting at a yield to redemption of 4.652% at a  current price to buy of 102.20.

However a new gilt offer which just arrived in my mailbox from HL is only offering 4.125% to 2033 (deadline for applications next Tuesday).

If this is eventually priced anywhere near par, that would be a noticeable yield reduction compared to TR35V but with only a 2 year difference in duration. 

A low headline rate of 4.125% for the 2033 gilt seems to be flagging the possibilty of more B of E rate reductions before xmas.

Looks like I maybe hanging on to TR35V a bit longer than planned.

phlebas192

The coupon at which new issues are offered is just something close to the market rate for existing similar maturity gilts and I don't think we should read anything more into it than that. TR33 matures in January 2033 just two months before this new issue and currently has a gross redemption yield of 4.19% but it would have been a fraction less on the 22nd when the new issue rate was probably determined. So it was likely a toss up between 4.125% and 4.25%.

Basically, the DMO sets the coupon such that the market will value the new issue close to par and hence raise the required amount of cash. But given that there are a few days between the announcement and the deadline, the actual issue price will usually be below or above par depending on how the market has moved in the meantime.