Looking for best 1 year fixed rate bond/ gilt

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/82085694#Comment_82085694

Dividend Data gives the YTM as 4.196%. Work it out yourself? I have that gilt and I am just sitting on it.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82085679#Comment_82085679

Yes if there are any sales, that could result in additional income to declare (as indicated on the sale contract note), but I think the intention here is to hold to maturity.

EthicsGradient

https://forums.moneysavingexpert.com/discussion/comment/82085896#Comment_82085896

I have no idea what the "simplified model" is. Had you heard of it before? Can you explain it? Have you heard of many people or organisations using it in preference to the "gross yield", which does seem more in line with the YTM of Dividend Data (giltsyield.com is now updated - figures are "gross" 4.151% and "DMO" 4.89%, so it was not just a typo or copying mistake).

The next largest difference in the figures in the near future is TG29 (4.371% Gross, 4.695% DMO). At 0.5% coupon, it's another low-coupon one like TN28 at 0.125%; however, TG30, at 0.375%, is 4.495% Gross, 4.446% DMO. I can't see a pattern.

k_man

TN28 and TG29 both have a coupon due tomorrow, which appears to cause the difference to the DMO figure (which tbh, I just ignore anyway).

Setting the settlement date to just after the coupon, and the Gross and DMO are much closer

EthicsGradient

https://forums.moneysavingexpert.com/discussion/comment/82085971#Comment_82085971

Thanks. You get strange effects - eg for TG32 (1%, matures 31/1/2032) and TR33 (3.25%, matures 31/1/2033), the figures for today and settlement T+1 or T+2 are:

T+1 TG32: Gross 4.687% and DMO 4.749%; TR33 Gross 4.790%, DMO 4.633%

T+2 TG32: Gross 4.685% and DMO 4.639%; TR33 Gross 4.784%, DMO 4.732%

So for TG32, T+1 gives a 0.062% higher DMO figure than Gross, but for TR33 0.157% lower. For T+2, TG32 DMO is 0.064% lower, and TR33 is 0.052% lower.

I'd have thought that for low-coupon gilts like TN28 and TG29, there wouldn't be that much difference between calculations.

The advice to ignore the DMO number seems reasonable, anyway.

Newbie_John

These numbers are just estimations, short term currently return close to 4% and long term up to 6%.

The price changes every minute, the interest add up every day - so I wouldn't really think it over why one is 4.1% and rhe other 4.3%

It's more of how long do i want to lock in? Do i want to take a chance and buy 2050+ gilt hoping BoE rates will go down and then sell it earlier for larger profit (again here that estimated return value is useless, 4.3% can return 10% or lose 10% if sold earlier when its not favourable time). Do i want to avoid tax? - this should determine which one to go for..

SnowMan

https://forums.moneysavingexpert.com/discussion/comment/82085694#Comment_82085694

The 4.959% just looks wrong. The gross yield of around 4.2% is currently correct when I just checked against the current price.

There shouldn't be too much difference between the gross yield and the DMO yield. The DMO calculation is simply based on equating the dirty price with all the cashflows payable under the gilt (coupons and redemption amount). One difference though is that the official DMO calculated yield is the annual yield convertible half yearly which is different to the annualised gross yield.

By analogy think of a savings account that pays 4%pa gross interest half yearly and has an AER of 4.04% as a result (=1.02^2-1). That's equivalent to a gilt with half yearly coupon with a gross (redemption) yield of 4.04% and a DMO gross (redemption) yield of 4% (convertible half yearly).

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/82085954#Comment_82085954

No, I do not use that website. The official numbers used by the BoE are available from Tradeweb (free registration). They are numbers for a tax free account. You can do the calculation yourself with XIRR on a spreadsheet. The cash flows are clear here. You can take tax into account if you wish.

In my case, it is blindingly obvious that low coupon gilts are better for me than savings accounts. Tradeweb can be a pain, so I use Dividend Data, which looked reasonably accurate when I checked. I do not need great accuracy.

GeoffTF

DMO stands for Debt Management Office, by the way. The DMO publishes documents showing how to calculate the cash flows for the various types of gilt. It is rather complicated, especially for linkers. You can get the answer more simply, but it is important not to bodge it up. When I checked the various websites, Dividend Data seemed to be the best. I found a seriously inaccurate number on one of the websites IIRC.

itsme999

UPDATE

I just purchased TG27 , same value as did with TG35 early this week.

I have bonds maturing at different dates, will be back in few months.

Thank you all for the inputs, much appreciated.