The Lemon Fool

JohnW wrote:Is there any capital growth with bonds? They’re issued for £100 and they redeem for £100.

There can be. Their value on the secondary market can drop below 100. Even some Gilt issues now stand below par, or have done in recent weeks. That's ones with coupons below current levels of interest rates.

Alaric wrote:

JohnW wrote:Is there any capital growth with bonds? They’re issued for £100 and they redeem for £100.

There can be. Their value on the secondary market can drop below 100. Even some Gilt issues now stand below par, or have done in recent weeks. That's ones with coupons below current levels of interest rates.

Not all bonds are issued at £100.

GoSeigen wrote:
One obvious advantage of gilts over corporate bonds is their tighter spread and huge liquidity.

GS

GS, which broker do you buy gilts from. On HL, I can see spreads of 3+% on online dealing gilts. Am I missing something obvious, or that corps have higher spread and so you said so.

Some of us don't believe any market is "perfectly efficient". Especially a market that most people seem to accept on faith is perfectly efficient.

GS

JohnW wrote:Is there any capital growth with bonds? They’re issued for £100 and they redeem for £100. They’re a contract to pay you back your money, and give you some interest. I told you my area is cat food.

The 2027 gilt was trading well above 120p until last year.

GS

air04 wrote:

GoSeigen wrote:
One obvious advantage of gilts over corporate bonds is their tighter spread and huge liquidity.

GS

GS, which broker do you buy gilts from. On HL, I can see spreads of 3+% on online dealing gilts. Am I missing something obvious, or that corps have higher spread and so you said so.

Which gilt are you trying to trade? I just use the usual discount brokers, tried one now and TR27 (chosen as random) shows less than 0.5% spread...

GS

JohnW wrote:Is there any capital growth with bonds? They’re issued for £100 and they redeem for £100. They’re a contract to pay you back your money, and give you some interest. I told you my area is cat food.

There can be. Unless you intend to simply hold until expiry, with gilts and other bonds your capital is at risk - market demands higher rates, the value of your bond drops to reflect this.

Hence, with 1-year savings bonds now over 4%, with no risk to capital, buying (longish) gilts seems like a (contrarian?) punt on interest rates falling again in the not too distant future.

But my area is dog food. Has to be, I've a very sensitive pooch

GoSeigen wrote:

air04 wrote:

GoSeigen wrote:
One obvious advantage of gilts over corporate bonds is their tighter spread and huge liquidity.

GS

GS, which broker do you buy gilts from. On HL, I can see spreads of 3+% on online dealing gilts. Am I missing something obvious, or that corps have higher spread and so you said so.

Which gilt are you trying to trade? I just use the usual discount brokers, tried one now and TR27 (chosen as random) shows less than 0.5% spread...

GS

Thanks GS, I use HL. On HL https://www.londonstockexchange.com/sto ... mpany-page and LSE https://www.londonstockexchange.com/sto ... mpany-page , for TR27, I can see 1% spread(101.44 / 102.44). Is the 1/2% spread on live prices when we try to quote?

Also, I noticed that as I go to gilts that have further way maturity dates, the spreads widen... probably the demand supply is different there. Last friday, I helped a friend trade TG35(67.14/68.64 now), it has 2.23% spread.
For TG71, there is 3.8% spread on HL(59.38/61.63)

air04 wrote:

GoSeigen wrote:

air04 wrote:

GoSeigen wrote:
One obvious advantage of gilts over corporate bonds is their tighter spread and huge liquidity.

GS

GS, which broker do you buy gilts from. On HL, I can see spreads of 3+% on online dealing gilts. Am I missing something obvious, or that corps have higher spread and so you said so.

Which gilt are you trying to trade? I just use the usual discount brokers, tried one now and TR27 (chosen as random) shows less than 0.5% spread...

GS

Thanks GS, I use HL. On HL https://www.londonstockexchange.com/sto ... mpany-page and LSE https://www.londonstockexchange.com/sto ... mpany-page , for TR27, I can see 1% spread(101.44 / 102.44). Is the 1/2% spread on live prices when we try to quote?

Also, I noticed that as I go to gilts that have further way maturity dates, the spreads widen... probably the demand supply is different there. Last friday, I helped a friend trade TG35(67.14/68.64 now), it has 2.23% spread.
For TG71, there is 3.8% spread on HL(59.38/61.63)

There is a big difference between the generic quoted spread, and the true bid-offer available. From the broker, and link, provided what you are seeing is the ORB platform. In practice what you will get will be different, although I suspect your broker here will limit itself to a Request for Quote electronic enquiry to the market makers on that platform. This is very "cheap" execution, but "expensive" in terms of price and liquidity - although perhaps that's fine for the small retail transactions it serves.

If you want "better" execution and access to bigger more liquid pools, with smaller spreads, then it is more expensive. That's the choice end users have to make. What is difficult is that for most equities retail investors have access to cheap massive liquidity and the primary stock market(s) in the UK, and expect that is what they are accessing when executing bonds in the UK. You aren't. The bond markets aren't set up that way.

air04 wrote:

GoSeigen wrote:

air04 wrote:

GoSeigen wrote:
One obvious advantage of gilts over corporate bonds is their tighter spread and huge liquidity.

GS

GS, which broker do you buy gilts from. On HL, I can see spreads of 3+% on online dealing gilts. Am I missing something obvious, or that corps have higher spread and so you said so.

Which gilt are you trying to trade? I just use the usual discount brokers, tried one now and TR27 (chosen as random) shows less than 0.5% spread...

GS

Thanks GS, I use HL. On HL https://www.londonstockexchange.com/sto ... mpany-page and LSE https://www.londonstockexchange.com/sto ... mpany-page , for TR27, I can see 1% spread(101.44 / 102.44). Is the 1/2% spread on live prices when we try to quote?

Also, I noticed that as I go to gilts that have further way maturity dates, the spreads widen... probably the demand supply is different there. Last friday, I helped a friend trade TG35(67.14/68.64 now), it has 2.23% spread.
For TG71, there is 3.8% spread on HL(59.38/61.63)

Right now, when I start to put in a trade, Interactive Investor is giving a "realtime quote" for TR27 of £1.0145 - £1.0245. However, if I preview the order and enter the 15 second acceptance window it gives a buy price of £1.02067.

For TG35 it's £0.6691- £0.6841 but then on previewing the buy price is £0.67876.
For TG71 it's £0.5843 - £0.6068 but then on previewing the buy price is £0.606125.

As I don't already own any of these (and I let the previews timeout, so I didn't actually buy any!) I can't say what it'd actually get on selling these.

Calculation of %ages are left as an exercise for the reader.

Thanks GS and mc2fool

mc2fool wrote:

air04 wrote:Thanks GS, I use HL. On HL https://www.londonstockexchange.com/sto ... mpany-page and LSE https://www.londonstockexchange.com/sto ... mpany-page , for TR27, I can see 1% spread(101.44 / 102.44). Is the 1/2% spread on live prices when we try to quote?

Also, I noticed that as I go to gilts that have further way maturity dates, the spreads widen... probably the demand supply is different there. Last friday, I helped a friend trade TG35(67.14/68.64 now), it has 2.23% spread.
For TG71, there is 3.8% spread on HL(59.38/61.63)

Right now, when I start to put in a trade, Interactive Investor is giving a "realtime quote" for TR27 of £1.0145 - £1.0245. However, if I preview the order and enter the 15 second acceptance window it gives a buy price of £1.02067.

For TG35 it's £0.6691- £0.6841 but then on previewing the buy price is £0.67876.
For TG71 it's £0.5843 - £0.6068 but then on previewing the buy price is £0.606125.

As I don't already own any of these (and I let the previews timeout, so I didn't actually buy any!) I can't say what it'd actually get on selling these.

Calculation of %ages are left as an exercise for the reader.

Necro bumping (only just stumbled across this thread) and the higher actual price quotes I suspect reflects the dirty price i.e. the proportioned interest since the last interest payment that has to be paid to the seller as their share of that 'accumulated' interest.

1nvest wrote:

mc2fool wrote:Right now, when I start to put in a trade, Interactive Investor is giving a "realtime quote" for TR27 of £1.0145 - £1.0245. However, if I preview the order and enter the 15 second acceptance window it gives a buy price of £1.02067.

For TG35 it's £0.6691- £0.6841 but then on previewing the buy price is £0.67876.
For TG71 it's £0.5843 - £0.6068 but then on previewing the buy price is £0.606125.

As I don't already own any of these (and I let the previews timeout, so I didn't actually buy any!) I can't say what it'd actually get on selling these.

Calculation of %ages are left as an exercise for the reader.

Necro bumping (only just stumbled across this thread) and the higher actual price quotes I suspect reflects the dirty price i.e. the proportioned interest since the last interest payment that has to be paid to the seller as their share of that 'accumulated' interest.

No, those are all capital only values. Accrued interest is tacked on later, once the quote is accepted.

The actual spread on gilts, purchased through a retail broker, is typically much less than is displayed in the bid/ask quotes you will see. When I bought some 1y gilts on 10 March the spread was 0.17%. I already held these gilts, so I obtained a firm sell price before I purchased. My buy price was 96.727, sell 96.566. For that same gilt (TN24), HL are displaying prices with a spread of 0.50, but I was just quoted 96.8910/96.9915 for £10k nominal. That same sell price was good up to £200k nominal by the way, illustrating the amount of liquidity in gilts.