ILG information

Veloflyer

Chaps - How do I find out when an ILG was first issued - TR26 for example?
How do I find out what the inflation rate is from when an ILG was first issued?

The thinking being that if the current dirty price of the ILG is less than what it should be given the inflation rate since first issue, then perhaps it is worth a punt? 

Veloflyer

and to answer the first perhaps....Inflation calculator | Bank of England

Marcon

https://www.dmo.gov.uk/data/gilt-market/gilts-in-issue/#:~:text=Gilt%20Market,the%20gilt%20was%20lent%20out.

DRS1

Not quite sure if this has all you need but it has issue dates and index ratio columns

Gilts in Issue - giltsyield.com

SVaz

For £1000 original face value in 2015, you would be paying £1560 + fees today.
I imagine you wouldn’t get anything above that at maturity because of the time lag and it’s only 3 months away. 

Nebulous2

I find this site very useful for information about gilts. 

https://www.dividenddata.co.uk/uk-gilts-prices-yields.py

You can toggle between conventional and index linked at the top. On the list of gilts the little arrow on the right hand side takes you to a whole page on each individual gilt, giving information including charts and issue date. 

michaels

Veloflyer said:

Chaps - How do I find out when an ILG was first issued - TR26 for example?
How do I find out what the inflation rate is from when an ILG was first issued?

The thinking being that if the current dirty price of the ILG is less than what it should be given the inflation rate since first issue, then perhaps it is worth a punt? 

Why would the market be mispricing them in this way?

DRS1

michaels said:

Veloflyer said:

Chaps - How do I find out when an ILG was first issued - TR26 for example?
How do I find out what the inflation rate is from when an ILG was first issued?

The thinking being that if the current dirty price of the ILG is less than what it should be given the inflation rate since first issue, then perhaps it is worth a punt? 

Why would the market be mispricing them in this way?

Not sure if this explains it but there is an interesting post by @Snowman here (the one with the pictures).

Index-linked gilt ladder — MoneySavingExpert Forum

Alexland

Veloflyer said:

The thinking being that if the current dirty price of the ILG is less than what it should be given the inflation rate since first issue, then perhaps it is worth a punt? 

michaels said:

Why would the market be mispricing them in this way?

It's not really a mis-price but in current market conditions investors expect to pay less for most ILGs than they are currently worth if you added 'inflation so-far' onto the £100 redemption value because it's still a way away from redemption and during that time the inflation adjusted coupon is usually unattractive relative to other investment options. So investors expect to buy the gilt at a discount so that over the years the combination of coupon and capital growth together give an attractive real return.

For example a 2050 ILG with 25 years remaining is currently trading at a 31% discount to it's current worth because it will only pay less than 1% coupon so the overall real return is 2%+.

Around 4 years ago investors were paying a premium (as no other good safe returns were available with near zero interest rates) locking in negative real returns. I thought it was mad at the time but I guess some believed those conditions would continue for the long term, were sticking to traditional portfolio theory or were required to buy them for their own compliance reasons.

There's no opportunity in picking a particular gilt to buy at an extra high discount as there are enough buyers in the market that they will all be priced efficiently. There is just a curve of real yields peaking at around 2%+ on that 25 year gilt.

michaels

Interesting, but this is just a statement of what the current real return would be if held to maturity.  I guess you could take a punt on the market revaluating the value of inflation insurance again and the inflation plus component falling (or rising even more) but again, this is betting against the market consensus rather than some sort of built in money making scheme.

Alexland

michaels said:

Interesting, but this is just a statement of what the current real return would be if held to maturity.  I guess you could take a punt on the market revaluating the value of inflation insurance again and the inflation plus component falling (or rising even more) but again, this is betting against the market consensus rather than some sort of built in money making scheme.

Sure yes you could place bets on the prices changing in the same way you can on company shares.

There might be profit to be made trading your money up and down the yield curve over time and as it changes shape if you didn't care when they matured. But for those of us building ladders then we are trying to match assets to income needs.

But the idea that you will find one ILG that is mispriced relative to the others isn't going to happen.

Historically the real return on ILGs has varied in the range of around -2.5% to +4% so if they are currently offering around 1.5% to 2% then current price seems to be roughly at the historic average certainly a lot better than we have seen for many years.