Ishrc Uk Gilt Discussion Threads

[bishan bedi] 18/1/2024 12:41

I am a relative bond novice, so would appreciate the thoughts of anyone with more experience than me in the field.

I have been looking for a way to go long on UK bonds in general in order to take advantage of the capital gain when rates fall this year (if that hypothesis turns out to be correct of course but for the purposes of this let's assume it does).

Any vies on whether this is the best ETF out there for this?

Also are there any discussion boards related to bonds where I might learn more about bond mechanics and how to trade them? I am focussed on gilts more than corporate bonds but that is because of the perceived (in my head) safety of govt over corporate. Happy to listen to why this is incorrect too!

Thanks in advance

[kiwi2007] 14/10/2022 18:35

FT -
....A senior executive with a large pension fund, who did not wish to be named, said the BoE’s gamble, by not extending its support programme, “has not paid off”.

“We will be back to 5 per cent by Monday, and then the merry-go-round will start again,” the person said, referring to the 30-year gilt yield.

Thankfully I took my finger off the buy button.

[ebolaman] 23/11/2014 14:13

Thanks Henry. Did you ever use IGLT to help call the top and bottom of the market in the past or just ukx?

[henryatkin] 18/11/2014 14:05

I trade purely on technical and the direction of the all share index. Mostly its when I have gone heavily into cash from smaller company shares because PE values are too high as per January.

[ebolaman] 17/11/2014 15:33

Henryatkin how do you trade IGLT, similar to shares using technical and fundamental ? Can it be traded purely technically?

[henryatkin] 17/11/2014 08:54

Yes that sums it up well & its why people have been talking about a bond bubble but that bubble won't burst until interest rates start rising. I was being warned back in 2010 against trading IGLT but it has still worked because governments still kick the interest rate can down the road. If you look at the long term IGLT chart there is a 20-30% drop to get back to 2006-2008 levels. Bear in mind that IGLT is a basket of both long & short term gilts.

[ebolaman] 16/11/2014 17:28

I think this is it;

Returns from gilts and corporate bonds
If you buy £1,000 worth of Treasury stock 4% 2015 gilts, you would receive 4%, or £40, every year until your £1,000 loan is repaid in 2015. The income you receive is called the 'income yield', 'running yield' or 'interest yield' and is paid twice a year (2% or £20 every six months, in this instance).

The coupon is determined by the length of time you must wait for maturity and/or the riskiness of the company within which you invest.

The further away the redemption date, the higher the interest you will receive as you are having to wait longer to be repaid. Similarly, the greater the risk you take on a company, the higher the interest rate you can expect to receive.


Gilts and corporate bonds on the secondary market
You can buy gilts at issue from the government's Debt Management Office, but most gilts, government bonds and corporate bonds are traded on a secondary market and their value can fluctuate, based upon interest rates and the solvency of the issuer.

Bond prices will rise when general interest rates are low, because the rates of interest they pay are fixed and will beat the short-term rates available from banks.

Therefore, you may buy a bond or gilt for an amount above or below the nominal value and this will have an impact on both how much interest you receive as an income and the amount of money you will receive when the bond matures.

It works like this:
If you paid £95 for a gilt, government bond or corporate bond with a nominal value £100, you will make a capital gain when it matures, as the loan is repaid at the nominal value.
Similarly, if you bought the gilt, government bond or corporate bond for £105, you would lose out on maturity, as you're only paid back at the nominal value.
The amount of interest you'll receive will also change dependent on the price you paid. If you buy a bond or gilt paying 6% for, say, £95, the effective interest rate you'll receive is higher than 6% as interest is paid on the nominal value, not the second-hand market price you paid.
In this example, the rate you receive is actually 6.32% (i.e. 6%/£95 = 6.32%).
What is the 'redemption yield' of a gilt or corporate bond?
The redemption yield is a rate of return that combines the interest rate you get based on the price at which you buy the gilt, government bond or corporate bond, and the profit or loss you get if you hold the bond to maturity.

If you bought a gilt, government bond or corporate bond at a price that's lower than the launch price (£100), the redemption yield will be higher than the running yield, as you're set to make a profit when the bond matures.

Conversely, if you bought a gilt, government bond or corporate bond at a price that's higher than the launch price (£100), the redemption yield will be lower than the running yield, as you'll make a loss if you hold the bond to maturity.

[ebolaman] 16/11/2014 14:40

Henry thank you.
If I bought a gilt for £1100 with a 5% coupon but sold it later at maturity of the gilt, would I get 4.545% per year of £1000 i.e £45.45 back annually and £1000 which was the original price of the gilt? Is this a fairly safe way of getting a decent interest rate at minimal risk when bank rates are so low? Ideally you want the gilt price that you paid to increase though as I understand it.
I have little time to trade at present and a decent sum to get some sort of return on, just confused as where to invest it.

[henryatkin] 16/11/2014 12:36

The Government issues gilts, also known as gilt-edged securities, to fund its borrowing – in effect when you buy gilts you are lending the Government money. Issued in £100 units, they promise to pay a fixed income over a fixed term. Investors are repaid the nominal capital value when the gilt matures.
There are different types of gilt. Some run only for a few years, while others last for up to 30 years. There are index-linked gilts, meaning that interest and capital payments are adjusted to take inflation into account. Others are "strippable", which means that the individual interest and redemption payments may be bought and sold separately. The most common category is the conventional gilt.
Financial advisers reckon that gilts have a place as part of a balanced portfolio, although their risk status does mean that returns are very low. Older people can use them as a core holding around which to add other investments that carry higher risk.
How do I know how much fixed income I will receive and for how long?
What income you get, and for how long, is all in the title of the gilt you buy. Take a conventional gilt, for example, and a holding of £1,000 nominal of 4.75pc Treasury Stock 2010.
Before you go any further can you explain what is meant by "nominal"?
The £1,000 nominal is the amount of the gilt. It is not necessarily how much it is worth, or how much it cost you to buy. A £1,000 nominal holding of that gilt may be worth more or less than £1,000 in the market. But when this gilt matures you will get back £1,000. But you can invest any amount. For instance, you could invest £2,700. If the price is £900 for each £1,000 nominal you would get £2700 ÷ £900 = 3 x £1,000 = £3,000 nominal of stock. This means you would have assured capital growth of £300 when the gilt is redeemed.
And the 4.75pc?
This tells you how much income you will receive each year. It is called the "coupon" and is applied to your nominal value to determine the size of your interest payment or "dividend". Dividends are usually paid twice a year. In this example, you would get two payments of £23.75 a year for each nominal amount of £1,000, before tax.
What does "Treasury" mean?
This is merely the name given to the gilt when it was issued and is of no real significance. There are a variety of names given to gilts, such as War Loan. This was the name given to gilts issued during the First World War to fund the war effort.
I assume the 2010 figure tells me how long I can hold the gilt?
Yes, this is the maturity date. It is when you will get back your £1,000. You cannot cash in the gilt before then, although it can be bought and sold in the market at any time.
You mentioned the price of gilts might be more, or less, than the nominal value. What makes a gilt price change?
Gilt prices are affected by interest rates, inflation and the general expectations of the economy. In general, if interest rates are expected to rise the price of gilts will fall, and if rates are expected to fall their prices will rise.
The price will depend on how attractive the 4.75pc coupon is at that time. With interest rates at 3pc, a 4.75pc return looks attractive and so the price will be higher than the £1,000 nominal value. However, if interest rates were 8pc, say, the coupon of 4.75pc would look unattractive and so the price would fall below £1,000.
That's gilts in a nutshell. If you buy a holding of £1,000 nominal of 4.75pc Treasury Stock 2010 you will get £47.50 income a year until 2010, plus you will get back £1,000 when the gilt matures.
But isn't there something about an "interest yield"?
Yes, the yield is often confused with the coupon. The coupon is the interest rate on the nominal amount of the gilt – in the case of the 4.75pc Treasury Stock 2010, you get 4.75pc on each £1,000. The yield, however, is different. Many investors do not buy the stock for £1,000; they may, for example, have bought it in the market for £1,100. The yield is the interest rate based on the buying price – in this instance, 4.3pc. It is calculated by dividing the coupon by the price.
OK, I might be interested. How do I go about buying gilts?
There are two ways of buying gilts. You can go direct to the Government's Debt Management Office (DMO) when new stock is issued; or you can go to the market via a stockbroker or the Bank of England's brokerage service, which allows stock to be bought and sold through any main Post Office.
• For further information visit the Debt Management Office website,

[henryatkin] 01/11/2014 09:24

I closed this trade yesterday on news of Japanese QE2 & Russia/Ukraine gas supply agreement. The money has been transferred into smaller company funds & Japanese funds. BRSC, HSL, ASL & SLS have all broken their down trend lines so I think IGLT has done its job for now with a 5% gain YTD while smaller companies tanked.

[henryatkin] 15/10/2014 14:06

dasv....it worked in 2008/9 under a different ticker and it worked in 20011/12. Today its up 10% year to date - not bad imho.

[dasv] 13/10/2014 09:14

v. prescient observations henry.

[henryatkin] 10/10/2014 13:42

free stock charts from uk.advfn.com


IGLT continues to hedge the market. Only up 6% since it gave an entry signal but not bad compared to UKX, MCX & SMX. With Germany looking like it might go into recession as a result of Russian sanctions and China growth continuing to slow there is a lot of risk around. IGLT price rises with the increase in equity risk. IGLT can be a very tight spread at around £10 cost per £16k trade when I last added to the position. Low spread & low volatility - ideal for long term positions.

[henryatkin] 29/8/2014 13:30

IGLT is still indicating a weak market and has shown to be a better place to hold cash rather than a deposit account. Its only gained 5% but what would it achieve in an instant access deposit account?

Two weekly candles:

free stock charts from uk.advfn.com

[henryatkin] 17/8/2014 11:35

IGLT doing what it should when equities are selling off, IGLT is anticipating worse to come - weekly candles:

[henryatkin] 05/2/2014 13:43

The yield curve is starting to flatten off as long term rates retrace in the US:

[henryatkin] 04/2/2014 09:38

Is this chart a cause for concern or is it simply strategy traders hedging their portfolio out of stocks and into gilts for safety. The same pattern can be seen on US treasuries TR32. Are gilts telling us to look for something not fully factored in yet or is it simply a market blip?


Personally I think its a blip up to £11.5 but over that it becomes a bit more serious because bonds should be falling as investors anticipate future rate rises.

[atflores] 08/8/2011 10:06

A haven for the next few years. While the political class would love to see rampant inflation to wash away their problems, I think deflation is far more likely. The UK has relatively little to offer the world in terms of competitive products and services, and has crippled future prospects with climate legislation of remarkable absurdity. We need all that to change before anything more lively than deflation will appear.

[ben gunn] 27/1/2009 13:21

Simon
Your October post above should win a prize!

[simon gordon] 17/10/2008 11:29

Take a look at the TR32 and T46 threads.

I agree, the Euro 7-10 year, iShare looks good.

I'm lookin at Yen bonds as I am concerned the pound will collapse.

Hey ho..

[ben gunn] 17/10/2008 10:56

Gosh Simon
A bond thread.....whatever next.

I hold but remain concerned that the safety of this holding is weak compared to Euro based govt bonds.

[simon gordon] 14/10/2008 19:10

Bond Calculator: