Should I Delay Buying Gilt Ladder

MarkCarnage

https://forums.moneysavingexpert.com/discussion/comment/81914829#Comment_81914829

By delaying you are essentially betting on real yields rising….which they might, or might not. Main thing is that real yields aren't negative at the moment right across the curve, unlike the situation for some years until 2022.
How long is your appetite for delaying? Do you have a specific real yield trigger/target? Is it actually worth delaying for that?

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81914829#Comment_81914829

I think I have a similar issue. I have just sold enough equities within my SIPP to cover basic expenditure hopefully until I depart this mortal coil. Mainly this is to preserve what I have, partly as a bridge until SP kicks in. It is now in cash in the SIPP with the intention to purchase a 4 or 5 year ILG ladder at some point. I too am wondering whether to delay, but if the ILGs are held to maturity as I intend, does any delay signify?

ali_bear

I guess you need to check the dirty price of those ILG's to see what you will be paying for them.

dawsonrm

So I've decided to pull the trigger on this and put the ladder in place. Not really surprising but as bond yields have risen the cost of the ladder has reduced so waiting a few weeks has actually proved beneficial.

I did have one last question for anyone who uses the lategenxer tool. I'm presuming it's based on real rather than nominal values. In other words if I put in 10,000 a year for example this means 10000 in today's money inflation adjusted not an exact nominal 10000.

QrizB

I'm presuming it's based on real rather than nominal values.

If you build a ladder of nominal gilts it uses nominal values. If you build an index-linked gilt ladder it uses real values.

SVaz

if you can buy ordinary Gilts under par then you will have a capital gain on top of the coupons at maturity.

I’ve just topped up a couple of mine for 2034/35, might do it again if prices drop even more. It’s weird looking at the couple of £thousand ‘losses’ on mine, knowing that it’s meaningless because I’m holding them to maturity, it still feels ‘wrong’ though.
I’ve looked at linkers but the ones I’d want are still priced well over par.

QrizB

I’ve looked at linkers but the ones I’d want are still priced well over par.

Are you sure about that? Per the yield curves, the only IL gilts with negative real yields are the really short duration ones.

Here's a screen cap from the Late GenXer site:

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81997988#Comment_81997988

I sort if get that…..Put me right here please. I too have an ILG ladder - T27,29,30 and 31. From that yield curve, do I understand right that at maturity T27 - the first point on that chart in blue - will effectively lose a little at present inflation rates - in other words I may get the initial cost back, but not much extra to offset inflation?

The other ILGs would seem to be fine and would mature to cover inflation?

SVaz

I’m not talking about the yields. I’m talking about the current prices, every ILG I’ve looked at has been at least £1.30, so if I wanted 1000, I’d be paying £1300, why would I pay an extra £300 on the off chance that I’ll make that up in a decade’s time? I’d be on the back foot from the start, we might have a period of high inflation, then again we might not.

My ordinary Gilts are giving me 4.5% a year ( which I’m reinvesting in mmf) and I’ve made a capital gain on some of them by paying under £1.

I might buy at £1.10 for ILGs a decade out but not £1.30. It’s probably different for someone buying them for a full income but mine are just an ‘extra’ so if I’m wrong and inflation runs rampant then it’s a minor irritation, not a catastrophe.

QrizB

I’m talking about the current prices,

I think you're misunderstanding how ILGs work.

every ILG I’ve looked at has been at least £1.30 ... why would I pay an extra £300 on the off chance that I’ll make that up in a decade’s time

If we ignore T30I and T2IL, there aren't any IL gilts with a clean price anything like 130. So you must be looking at the dirty price.

The dirty price includes all the indexing since the gilt was issued. ILGs don't mature at a value of £100, they mature at a value of £100 plus indexation since date of issue.

Edit to add:

@Veloflyer I agree with your reasoning.