Ishr � Ind-link Discussion Threads

[jonwig] 07/5/2020 08:07

Dividend 7.52p, xd 14/05, pay 27/05.

[jimcar] 01/5/2020 15:30

Thnx Jonwig (and for your other posts)

[jonwig] 01/5/2020 11:48

JIM - here's the prospectus, Taxation is on pp134 ff:



It looks as though distributions are taxed as interest, but they have not given a ruling on CGT. (It's an Irish fund.)

My own attitude when I sell it is to not declare it in the body of my SA return, but add the fact in a note and let HMRC decide.

[badtime] 01/5/2020 11:29

You can get inside that spread 124 to buy is possible

[jimcar] 01/5/2020 11:18

Could anyone tell me me how INXG is treated for tax purposes. Would an increase in price be seen as a potentially taxable capital gain?

[mctmct] 01/5/2020 09:29

The return on the NG bond is, of course, very sensitive to the RPI in Feb 2021. The price is stable largely, I assume, because there's quite a wide bid-offer spread.

I also hold T30I, the treasury indexed gilt 2030, which is more volatile as its price depends on longer term inflation expectations.

RPI is due to be redefined before 2030 (though not, I think, before Feb 2021). I don't have any intuition about the implications for T30I.

[jonwig] 01/5/2020 06:53

I think I'm pretty indifferent to near-time numbers. It will take maybe a year before it starts to become clear what the outcome of collapsing supply and collapsing demand might be.

[badtime] 30/4/2020 21:18

What are you expecting the return on the NG bond to be re Feb inflation calc.

[mctmct] 27/4/2020 16:28

"If this govt spending gets monetised (even a bit) and doesn't lead to some inflation, then why not monetise a lot until it does? "

The New Monetary Theorists argue that an indpendent central bank can do this without problems and that "deficit" and "debt" are just nasty-sounding ways to describe sensible economic management. I'm sceptical.

That may work for a country with a strong credit rating, but it is likely to cause the ratings agency to put the rating under scrutiny and if the printing of money continues, to reduce it. See Zimbabwe.

IMHO, the crucial issue is keeping the confidence of foreign investors that your currency is stable. Lose that and the inflationary spiral becomes hard to stop.

[jonwig] 27/4/2020 15:15

Hi, thanks.

I don't think the macro conditions in US, UK, EU are all that different and it comes down to lower demand meeting lower supply. If either changes, we could get a trend to inflation or to deflation. (Weaker sterling is to be sure a possible trend.)

When you say "All the money injected into the economy has to be held by someone at every moment... " then yes, equities may be the place to be. But also a lot of discretionary spending has been deferred not cancelled.

If this govt spending gets monetised (even a bit) and doesn't lead to some inflation, then why not monetise a lot until it does?

[mctmct] 27/4/2020 11:53

Jonwig
Thanks for the link to the article. It's an interesting analysis from a US perspective. The UK has two particular differences from the US. Firstly, Sterling isn't a reserve currency like the dollar, so Sterling could very well fall against a basket of the currencies needed for UK imports, increasing the cost of imports and importing inflation. Secondly, the increasing likelihood of a messy end to the Brexit transition period in January may add to that effect.

If there's a perception that inflation may increase and Sterling may fall, then overseas investors may become less willing to buy UK Gilts at current prices, pushing up interest rates, which may feed back into inflation and currency expectations and exacerbate the fall in Gilts and the rise in interest rates. The next set of Gilt auctions may offer some insight.

I'm currently hanging on to INXG as portfolio insurance (and even the much shorter term NG1Q which matures in October 2021 with a value based on February 2021 RPI).

All the money injected into the economy has to be held by someone at every moment, and cash and Gilts are paying negative real interest rates, so there must be strong motivation for major holders to get their money into assets that will hold or increase in value. I think that's why every sign of a resumption in economic activity leads to a jump in markets.

[jonwig] 27/4/2020 11:08

A useful discussion of the arguments:

[jonwig] 04/4/2020 17:37

Hi, thanks for your input. I've been buying, and come next week (new ISA) will buy more.

Since no opinions are any better than guesswork (we haven't been here before) this ought to give capital preservation.

[mctmct] 04/4/2020 17:27

The austerity of the Thatcher years was driven by monetarism, with a stongly held view that the money supply determined inflation. Money is being created and put into circulation around the world in huge quantities, so we are about to test monetism very thoroughly.

We win either way: high inflation justifies our investments in INXG, lack of inflation will preserve the value of our other assets and should bury the creed of monetarism for ever.

[jonwig] 04/4/2020 16:42

This has a running yield of about 0.8% which is better than cash, at least!
Will UK inflation at last take hold when this immediate crisis abates?
I think so:

1) Weaker GBP thanks to borrowing and downgrades.
2) Supply shortages after disruption.
3) Some workers and jobs protected, a catch-up surge in demand.

Or maybe not. Even so, the chance is not negligible.

[mctmct] 04/9/2019 09:39

What's triggered the3.7% fall? The IL Gilts haven't moved today. Nor has the National Grid IL Bond.

[badtime] 11/12/2014 10:31

Started buying in the low 13's this has risen much faster and higher than i anticipated

[mctmct] 19/12/2013 08:49

£6.5m purchase just went through! Someone wants serious protection against inflation.

[mctmct] 19/8/2013 09:35

Praipus

From: (section 2.10)

"The RPI and RPIX include housing components such as owner-occupiers'
housing depreciation and council tax and rates, which are currently
excluded from the CPI. In addition the RPI further includes
mortgage interest payments (MIPs).

As for Agency Bias:

"In January 2013, the UK government decided not to change the way it calculated RPI despite a persistent formula effect which it felt was making RPI overstate inflation. It was felt proposed change would bring UK calculations more in line with international standards. But the Office of National Statistics reacted to fears that suddenly lowering RPI would not please users of the index who stated they they valued consistency. This decision hurt taxpayers, drivers and students and benefited those with private pensions still linked to the RPI and anyone invested in the near £300bn index-linked government bond market."

This last quote is from


mct

[praipus] 01/8/2013 23:28

I dont think Mortgages are included in RPI anymore

[praipus] 01/8/2013 23:28

IL suffers from the "agency bias" i.e if for some reason the Government do not want to show inflation they change how the RPI is made up i.e. removing Petrol and Mortgages out....probably other items too like VAT, income tax etc

[mctmct] 01/8/2013 09:55

Most (all?) UK IL bonds are linked to RPI, which will rise strongly if mortgage costs rise (as seems inevitable). Ending QE will push up interest rates and hit equities and fixed gilts, but surely IL bonds should benefit?

[hazelton] 13/6/2013 08:47

Many thanks jonwig , indeed you may be right. I have thought of linkers as in a different class to government bonds in general which I see as bad value. Maybe I should rethink.

One would have thought that when all this mess is over that the QE that has kept us afloat would cause some inflation in the following years and hence the linkers would keep their value.

INXG, ITPS etc are close to lower trend lines. I was looking at them as an opportunity - thoughts.

[jonwig] 13/6/2013 07:26

It started with US Treasuries when Bernanke suggested a couple of weeks ago that QE might be phased out.

Govt bonds have been weak ever since in US, UK and EMs. Linkers weak as they were highest rated and ending QE would lower inflation expectations anyway.

[hazelton] 13/6/2013 07:08

Does anyone have an idea about why these are dropping ?