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"What’s the return? " I say this without meaning any offence whatsoever but if you have to ask in here about auctioned gilts, then as an amateur with only limited investment experience, I would think in my own mind that they are probably not for you. ....and this isn't advice. Advice from a fab forum shouldn't be taken. You should only get investment advice from professionals. | |||
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"What’s the return? I say this without meaning any offence whatsoever but if you have to ask in here about auctioned gilts, then as an amateur with only limited investment experience, I would think in my own mind that they are probably not for you. ....and this isn't advice. Advice from a fab forum shouldn't be taken. You should only get investment advice from professionals. " Cool thanks. I am not planning to invest just interested. | |||
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"What’s the return? " You are in the range 5.4% on three month gilt and 5.1% on six months. Precise return will depend on price paid. | |||
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"What’s the return? You are in the range 5.4% on three month gilt and 5.1% on six months. Precise return will depend on price paid. " Thanks mate | |||
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"How does the auction work? Presumably those buying the debt (therefore giving current coffers a cash injection) will want highest return and the govt will be looking to get that down as low as possible? So… Org A “we’ll but that debt for six months but want 5.2%” Org B “we’ll also buy that debt for six months but we will settle for 5.1%” Govt “sold to org B” Or have I got that completely wrong?" I'd guess that UK promsies to give a coupon of 5.2 and pay back the principal of 100 at maturity, and you offer a price for this. Highest price wins. If you offer 100 you will make 5.2. (Numbers may be factor of two out as delaying with six month debt). | |||
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"How does the auction work? Presumably those buying the debt (therefore giving current coffers a cash injection) will want highest return and the govt will be looking to get that down as low as possible? So… Org A “we’ll but that debt for six months but want 5.2%” Org B “we’ll also buy that debt for six months but we will settle for 5.1%” Govt “sold to org B” Or have I got that completely wrong?I'd guess that UK promsies to give a coupon of 5.2 and pay back the principal of 100 at maturity, and you offer a price for this. Highest price wins. If you offer 100 you will make 5.2. (Numbers may be factor of two out as delaying with six month debt). " These are slightly different on a treasury bill there is no coupon effectively 0% interest all the gain is in the price paid which is less than £100 & the guaranteed sum of £100 paid by the government in three or six months depending on the bond. Three 3.5 billion that was sold on Friday averaged around £97.48, Which gives returns of around 10.5% AEV on 3 month bonds What is the significance of a zero coupon bond? Capital gains is at taxed much lower, if at all than coupon/interest. There is even a separate section on your tax return to list income gilts and Treasury bills as many people pay no tax on them at all | |||
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"How does the auction work? Presumably those buying the debt (therefore giving current coffers a cash injection) will want highest return and the govt will be looking to get that down as low as possible? So… Org A “we’ll but that debt for six months but want 5.2%” Org B “we’ll also buy that debt for six months but we will settle for 5.1%” Govt “sold to org B” Or have I got that completely wrong?" Something like that yes but of course they use brokers so any of us can be part of that voice we put our money in semi-blindly before 11 am, But unlike stocks and shares we know we cannot lose anything and it will at least beat anything offered by banks and building societies if we are happy to shove it away for three months, And of course the tax benefits | |||
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"How does the auction work? Presumably those buying the debt (therefore giving current coffers a cash injection) will want highest return and the govt will be looking to get that down as low as possible? So… Org A “we’ll but that debt for six months but want 5.2%” Org B “we’ll also buy that debt for six months but we will settle for 5.1%” Govt “sold to org B” Or have I got that completely wrong?I'd guess that UK promsies to give a coupon of 5.2 and pay back the principal of 100 at maturity, and you offer a price for this. Highest price wins. If you offer 100 you will make 5.2. (Numbers may be factor of two out as delaying with six month debt). " That is how are gilt works yes. Think of a treasury bill as simply buying £100 notes of the government for less than £100 with a date when they will guarantee to buy them back. In between that they can be traded Just like any commodity/share/fund | |||
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