Government consulting on ways to incentivise greater retail investor take up of T Bills?

OldScientist

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

Most (all?) of the STMMFs use the SONIA rate as their comparator index (see https://www.bankofengland.co.uk/markets/sonia-benchmark ) which tends to be around the base rate. The future return is difficult to predict where changes in the base rate occur, but the yield to maturity (e.g., currently 4.09% for the Royal London STMMF) less fees and costs (~0.1%) is probably a reasonable estimate. I note that historic yield (or dividend payments) is always misleading where rates have changed.

As others have suggested, it is probably useful to compare the TBill against the relevant fixed term savings account.

easysaver

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

Thanks for this. I'm probably not the only one to have previously ignored t-bills on the assumption that purchasing one at auction would incur the usual dealing fee.
Confirmation of the fee free nature of these instruments on HL:
https://www.hl.co.uk/shares/ipos-and-new-issues

Does anyone know the situation on other platforms regarding availability and fees/charges to buy?

Alexland

MK62 said:

Difficult to see the logic behind this move

I agree it's inconsistent with their work to pointlessly damage ISAs.

However wanting to expand the T-Bill market is logical from the Treasury's perspective.

When interest rates are low they want to issue long dated gilts at low yields.

When interest rates normalise or are high they want to issue short dated T-Bill debt to avoid locking in the commitment to pay high coupons long term. However if they eventually rely too heavily on short term debt then they could end up in a Northern Rock situation where it becomes more risky to refinance in adverse market conditions requiring the BoE to buy them with printed money.

As a recent purchaser of long dated ILGs this reassures me that I have bought in at a yield that that the Treasury consider unattractive to issue at for any longer than necessary.

SnowMan

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

My concern with money market funds is that unlike savings deposits the capital isn't guaranteeed, see the FCA publication 'Resilience of money market Funds' (3.15). Of course treasury bills come with a government guarantee.

I'm not in the position that I need to use either money market funds or treasury bills so it's not a choice I have to make. But hypothetically if I was, I think I would choose treasury bills. 

phlebas192

easysaver said:

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

Thanks for this. I'm probably not the only one to have previously ignored t-bills on the assumption that purchasing one at auction would incur the usual dealing fee.
Confirmation of the fee free nature of these instruments on HL:
https://www.hl.co.uk/shares/ipos-and-new-issues

Does anyone know the situation on other platforms regarding availability and fees/charges to buy?

Each time they've been available on HL they have also been available on AJ Bell who also don't charge a fee.

SnowMan

Alexland said:

MK62 said:

Difficult to see the logic behind this move

I agree it's inconsistent with their work to pointlessly damage ISAs.

However wanting to expand the T-Bill market is logical from the Treasury's perspective.

When interest rates are low they want to issue long dated gilts at low yields.

When interest rates normalise or are high they want to issue short dated T-Bill debt to avoid locking in the commitment to pay high coupons long term. However if they eventually rely too heavily on short term debt then they could end up in a Northern Rock situation where it becomes more risky to refinance in adverse market conditions requiring the BoE to buy them with printed money.

As a recent purchaser of long dated ILGs this reassures me that I have bought in at a yield that that the Treasury consider unattractive to issue at for any longer than necessary.

Agree

There's a lot of nonsense talked about the government being at the mercy of bond vigilantes.

In reality the government sets the interest rate they pay on debt through bank base rate (remembering that the government ultimately sets bank base rate because it provides the remit to the Bank of England). And it can choose whether to borrow short or long. Even long term interest rates are to some extent controlled by government in the sense that it is at a simple level the market's view on what bank base rate will average out at in the future. But at shorter terms the government really do control interest rates (edit: and if you are a bank being paid bank base rate at 3.75% by the Bank of England on bank reserves why wouldn't you swap those reserves for short term treasury bills paying just over 3.75%?)

A lot of longer term government debt is owned by defined benefit pension funds to match long term liabilities. If I remember correctly it's been estimated that 80% of index linked gilts over 25 year term are owned by defined benefit pension schemes. As closed schemes run down and through buy ins and buy outs (insurers don't hold the same level of gilts after the buy-outs and buy ins) the demand from defined benefit pension schemes for these long term index linked gilts and long term conventional gilts will reduce over time and the required matching term will also reduce. 

It makes sense that the government issues gilts of such term that takes into account the requirements of investors. Government deficits aren't funded by the issue of debt, the government simply creates money to cover the excess of spending over taxes. It's just that by convention and because of the 'full funding rule', and to meet the needs for safe assets, the government issue debt equal to the amount of their deficit. All that is really doing is changing government liabilities from bank reserves to gilts, although it also stops the money supply increasing because of the deficit spending. The period of quantitative easing, when the government was buying back gilts, demonstrates that the government doesn't have to fund deficits through issuing debt.         

As a holder of around 25 year term index linked gilts, I'm similarly encouraged by government indications that they are moving towards shorter term debt issuance  

poseidon1

phlebas192 said:

easysaver said:

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

ColdIron said:

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums

Thanks for this. I'm probably not the only one to have previously ignored t-bills on the assumption that purchasing one at auction would incur the usual dealing fee.
Confirmation of the fee free nature of these instruments on HL:
https://www.hl.co.uk/shares/ipos-and-new-issues

Does anyone know the situation on other platforms regarding availability and fees/charges to buy?

Each time they've been available on HL they have also been available on AJ Bell who also don't charge a fee.

In my case Interactive Investors as well as HL, on the same cost free basis - 

https://www.ii.co.uk/analysis-commentary/ii-unlocks-investor-access-uk-treasury-bill-market-ii532354