Is this a Gilt/Bond or am I reading it wrong

citroen999

i'm trying to diversify my portfolio. I have maxed out stocks shares isa, a few single US stocks, vanguard fund, bitcoin (but only a small % of my portfolio)... 

I was trawling through YT looking at investing ideas in uk and came across Gilts. So my basic understanding is you put X amount in a gilt, leave it for X years then take the amount out but earn interest twice a year... 

Metro Bank Holdings plc (AG82) 14% RST CALL SUB NTS 30/04/34
This is on the Hargreaves & Landsdown platform, the coupon price is 14%, end date is 2034 so 9 years... 

14% seems too good to be true, and compounded for 9 years the £30k i have spare to invest would be just short of £105k... i'm obviously missing something and i bet its not as good as it seems so could some kind soul please point out where i'm going wrong so i dont waste anymore time getting excited..lol

ColdIron

That is a corporate bond, not a gilt. That 14% includes the risk that they will fail to pay the coupon or repay the capital

citroen999

ColdIron said:

That is a corporate bond, not a gilt. That 14% includes the risk that they will fail to pay the coupon or repay the capital

thanks for that... i knew i'd got it wrong.... and Metro Bank have had a rocky few years judging by the news articles i've just read in the last few minutes... i'll pass!!... cheers

wmb194

citroen999 said:

i'm trying to diversify my portfolio. I have maxed out stocks shares isa, a few single US stocks, vanguard fund, bitcoin (but only a small % of my portfolio)... 

I was trawling through YT looking at investing ideas in uk and came across Gilts. So my basic understanding is you put X amount in a gilt, leave it for X years then take the amount out but earn interest twice a year... 

Metro Bank Holdings plc (AG82) 14% RST CALL SUB NTS 30/04/34
This is on the Hargreaves & Landsdown platform, the coupon price is 14%, end date is 2034 so 9 years... 

14% seems too good to be true, and compounded for 9 years the £30k i have spare to invest would be just short of £105k... i'm obviously missing something and i bet its not as good as it seems so could some kind soul please point out where i'm going wrong so i dont waste anymore time getting excited..lol

It looks like a Tier 2 subordinated bond. High risk. As a retail investor you'd probably have a problem buying directly as the FCA doesn't want ordinary people to own these types of securities.

It's a reset bond; looks like it's only 14% until 30/04/29 and then it changes. You'd need to read the prospectus but probably a much lower rate linked to a certain duration of gilt (5 years?) plus a margin.

https://www.metrobankonline.co.uk/globalassets/documents/customer_documents/business-and-commercial/debt-prospectus.pdf

https://www.londonstockexchange.com/stock/AG82/metro-bank-holdings-plc/company-page

poseidon1

Indeed, as with many tier 2 bonds, no online dealing available on the DIY platforms, £100k minimum investment , closing price today £117.40 so capital loss if held to  redemption and  purchased at that level.

As a complex investment only available to sophiscated investors who can pass the complex investment questionnaire, so not one for the  beginner.

Alexland

Gilts are issued by the UK treasury not companies - they are the national debt.

If you invest in them you get the chancellor sweating to pay you back

Here is a list of conventional gilts
https://www.dividenddata.co.uk/uk-gilts-prices-yields.py

And a list of index (inflaiton) linked gilts
https://www.dividenddata.co.uk/index-linked-gilts-prices-yields.py

They are very safe as the government control the currency so can just print money to repay you (although that causes inflation but who cares if you have index linked gilts....)

poseidon1

Alexland said:

Gilts are issued by the UK treasury not companies - they are the national debt.

If you invest in them you get the chancellor sweating to pay you back

Here is a list of conventional gilts
https://www.dividenddata.co.uk/uk-gilts-prices-yields.py

And a list of index (inflaiton) linked gilts
https://www.dividenddata.co.uk/index-linked-gilts-prices-yields.py

They are very safe as the government control the currency so can just print money to repay you (although that causes inflation but who cares if you have index linked gilts....)

But of course with gilts  no prospect of an income yield in double figures, which is obviously what caught the OP's attention. 

Alexland

poseidon1 said:

But of course with gilts  no prospect of an income yield in double figures

Not yet at least - maybe one day

poseidon1

Alexland said:

poseidon1 said:

But of course with gilts  no prospect of an income yield in double figures

Not yet at least - maybe one day

I suspect double digit returns from UK gilts at a time when other G7 sovereign bonds remained in the low single digit range, would likely spell disaster for  UK cost of servicing its debt, and impact adversely on the pound exchange rate.

 Be careful what you wish for.

Alexland

poseidon1 said:

I suspect double digit returns from UK gilts at a time when other G7 sovereign bonds remained in the low single digit range, would likely spell disaster for  UK cost of servicing its debt, and impact adversely on the pound exchange rate.

Apparently in 1981 gilt auctions were achieving 16% we may see that again one day

aroominyork

Alexland said:

poseidon1 said:

I suspect double digit returns from UK gilts at a time when other G7 sovereign bonds remained in the low single digit range, would likely spell disaster for  UK cost of servicing its debt, and impact adversely on the pound exchange rate.

Apparently in 1981 gilt auctions were achieving 16% we may see that again one day

I'm sure it will be seen again, but whether we see it is another question.