Bonds - basic advice please

[mc2fool]

Just for completeness, I said mine in Halifax was a few quid adrift, that's because in that account dividends are set to pay away and although the money was taken from my cash balance from the redemption the income hadn't swept across.

Ha! That caught me out too with my IWeb a/c. I'd long had the trading a/c set to pay away dividends and the ISA set to just retain them, but I'd bed'n'ISA'd everything out of the trading a/c yonks ago and it was empty until I started buying gilts in it, and when the first coupon seemed overdue I was just about to fire off to IWeb when the penny dropped.

[kempiejon]

TR24 settled in iWeb before the weekend, I have the dividend in my income line, separate to capital.
New tax year and allowances means being pregnant with cash interest is a bit less of a potential tax bill.
A useful learning experience getting to grips with them and I see their place in my portfolio now.

[1nvest]

I have been musing on buying single bonds ...

Some Qs then if I may - and forgive my ignorance.

I am assuming gilts will preserve the wealth if there is an equities crash. Is this correct- always proving HMG does not default I suppose!

No. Gilts can crash also, and even if held to maturity the effect of inflation on your wealth isn't protected, and even if you bought index linked gilts, that wealth preservation only happens if you buy them at par (or better).

And the inflation measure is relative to a basket of consumer prices that may not match your particular consumption and where that inflation rate has broadly lagged house and stock share prices inflation; And where some of the returns may be taxed; And where its somewhat similar to cash deposits, its not you as the lender that gets to define the terms/conditions of the loan, rather its the borrower that sets the terms/conditions/rates.

Better than hard-cash, but still mostly for losers. I consider what bonds our pensions hold to be way more than enough exposure to that asset class, wouldn't add to that by lending some of my own capital.

Nowadays when you lend say £50,000 to a bank i.e. "deposit" into a "savings account" you may very well be subject to a string of questions if you want some of that repaid to you. £2000 - oh that's a lot, why do you want it? What its for? We suspect you may be money laundering so we wont clear that until we've informed the state and got its OK. Might be extended as per other walks ... sorry you're a member of the wrong religion (where social housing or medical treatment may be deferred/refused, or your birth certificate/passport defaced). Similar for lending (depositing), prove where it came from ...etc.

[bluedonkey]

Basic question about gilt interest coupons.

Gilt TR54 1.625% maturing 22.10.54. Current price £53.98. Is the running yield 1.625/53.98 = 3.01%? I see the yield to redemption is quoted as 4.40%, the difference arising I suppose from eventual redemption at £100.

[Lootman]

Basic question about gilt interest coupons.

Gilt TR54 1.625% maturing 22.10.54. Current price £53.98. Is the running yield 1.625/53.98 = 3.01%? I see the yield to redemption is quoted as 4.40%, the difference arising I suppose from eventual redemption at £100.

Yes, the redemption yield takes into account the gradual accretion of that £53.98 current price to the maturity payout of £100. That part is free of CGT so there is just income tax on the coupons.

As to whether lending money to the government (or anyone else) for 30 years is a good idea, I will demur

[88V8]

Basic question about gilt interest coupons.
Gilt TR54 1.625% maturing 22.10.54. Current price £53.98. Is the running yield 1.625/53.98 = 3.01%? I see the yield to redemption is quoted as 4.40%, the difference arising I suppose from eventual redemption at £100.

If useful in future... bond yield calculator.

V8

[Harry23]

... I am assuming gilts will preserve the wealth if there is an equities crash. Is this correct- always proving HMG does not default I suppose!
...
I believe it may be a reasonably good time to buy gilts - what say you?

Just picking up on the point about using bonds as a safer haven when I believe shares will become bearish; and the timings of bond cycles. I switched some of my shareholdings into bonds, gilts and gold in July, expecting a turbulent time in the share markets. Also because interest rates have been coming down, which I think is a traditional signal for bonds to go up. It was a big decision, as I've had a strategy of buy-and-hold 100% in global trackers for about 20 years, and it does involve an element of timing the markets which can be risky for amateurs like me.