The Lemon Fool

I am keen to tap the knowledge of anyone here who is familiar with buying US treasuries and UK Gilts. Information I have located to date seems to indicate the following:-

1. US Treasuries

US citizens can buy US treasuries including participating in new issues using the US Treasury website

https://www.treasurydirect.gov/

I say US citizens as I note I see that you have to use TreasuryDirect for which investors must have a Social Security number or EIN, a U.S. address, and a checking or savings account. Other than that I’m assuming there is only the secondary markets accessible via brokers.

2. UK Gilts

Is there a direct access purchase mechanism for UK Gilts. Can you buy them from NS&I or something ?. Including participating in new issues ?.

Other than that one seems to be directed purely at the secondary markets and brokers. Googling the issue results in the following guidance:-

How do I buy gilts? Gilts can be purchased from the secondary market through a stockbroker, bank or via the DMO's Purchase and Sale service. If you wish to use the DMO's Purchase and Sale service, must be a member of the Approved Group of investors.

AND

If a private investor wishes to purchase gilts the secondary market can be accessed through a stockbroker, bank or the DMO's Purchase and Sale Service.

Any comments from Fools who have practical experience with buying these instruments would be appreciated.

Regards

Pref

PrefInvestor wrote:I am keen to tap the knowledge of anyone here who is familiar with buying US treasuries and UK Gilts. Information I have located to date seems to indicate the following:-

1. US Treasuries

US citizens can buy US treasuries including participating in new issues using the US Treasury website

https://www.treasurydirect.gov/

I say US citizens as I note I see that you have to use TreasuryDirect for which investors must have a Social Security number or EIN, a U.S. address, and a checking or savings account. Other than that I’m assuming there is only the secondary markets accessible via brokers.

2. UK Gilts

Is there a direct access purchase mechanism for UK Gilts. Can you buy them from NS&I or something ?. Including participating in new issues ?.

Other than that one seems to be directed purely at the secondary markets and brokers. Googling the issue results in the following guidance:-

How do I buy gilts? Gilts can be purchased from the secondary market through a stockbroker, bank or via the DMO's Purchase and Sale service. If you wish to use the DMO's Purchase and Sale service, must be a member of the Approved Group of investors.

AND

If a private investor wishes to purchase gilts the secondary market can be accessed through a stockbroker, bank or the DMO's Purchase and Sale Service.

Any comments from Fools who have practical experience with buying these instruments would be appreciated.

Regards

Pref

I can only comment on UK gilts. They can be bought through your usual stockbroker in the same way as any other share. Just plug in the ticker and off you go. It's as easy as buying a share. An example is T24 which matures in September 2024. The spread is incredibly tight.

You cannot participate in new issues but with high liquidity and tight spreads that's not a problem

Thanks for that gan020. I am aware of that option. But I am really hoping for a way to participate in new issues and so get the opportunity to buy at par. May be unrealistic but seems like its an option for US investors with treasuries ?.

ATB

Pref

PrefInvestor wrote:Thanks for that gan020. I am aware of that option. But I am really hoping for a way to participate in new issues and so get the opportunity to buy at par. May be unrealistic but seems like its an option for US investors with treasuries ?.

ATB

Pref

The matter of buying at par for new issues in the UK has been discussed before. It's not possible for retail. If you search these boards long enough you can find the reason. IIRC you need to be some form of market participant which is not availalbe to retail.

PrefInvestor wrote: But I am really hoping for a way to participate in new issues and so get the opportunity to buy at par.

Dunno about par, but a way to participate here.

Don't recall that we heard any outcome from the OP in that thread.

V8 (no gilts)

Gan020 wrote:

PrefInvestor wrote:Thanks for that gan020. I am aware of that option. But I am really hoping for a way to participate in new issues and so get the opportunity to buy at par. May be unrealistic but seems like its an option for US investors with treasuries ?.

ATB

Pref

The matter of buying at par for new issues in the UK has been discussed before. It's not possible for retail. If you search these boards long enough you can find the reason. IIRC you need to be some form of market participant which is not availalbe to retail.

Don't be under the illusion that GEMMs get the opportunity to buy new issues at par either.

Gan020 wrote:[

I can only comment on UK gilts. They can be bought through your usual stockbroker in the same way as any other share. Just plug in the ticker and off you go. It's as easy as buying a share. An example is T24 which matures in September 2024. The spread is incredibly tight.

You cannot participate in new issues but with high liquidity and tight spreads that's not a problem

Been some years now since I was a market maker at a GEMM. Interested in your confirmation spreads are tight in the retail space, that certainly wasn't the case when I was in the market. The opposite in fact. I would be interested to hear what has changed and examples of those spreads.

dealtn wrote:

Gan020 wrote:[

I can only comment on UK gilts. They can be bought through your usual stockbroker in the same way as any other share. Just plug in the ticker and off you go. It's as easy as buying a share. An example is T24 which matures in September 2024. The spread is incredibly tight.

You cannot participate in new issues but with high liquidity and tight spreads that's not a problem

Been some years now since I was a market maker at a GEMM. Interested in your confirmation spreads are tight in the retail space, that certainly wasn't the case when I was in the market. The opposite in fact. I would be interested to hear what has changed and examples of those spreads.

I invested in gilts for years and always found the spreads tight enough not to worry about them, the exception being the smaller undated issues and also I've never traded index-linked.

GS

But I am really hoping for a way to participate in new issues and so get the opportunity to buy at par.

Buying at par is barely practical for anyone isn’t it? The bond has a fixed coupon, so it’s got to pay eg 2%/year for 5 years. It goes on sale at a predetermined date/time. Ahead of that date nobody knows what the yield will be on 5 year bonds. On the date of issue/sale, the market has set the 5 year yield at 2.1%/year; who is going to pay the face value for the bond (and get 2%/year) when they can buy a 10 year bond with 5 years to run which is yielding 2.1%/year? Isn’t that how it works? And if they are auctioned, and 2.1%/year is the current 5 year yield, I suppose you could bid the par value, thus paying more than anyone else, but why would you?

GoSeigen wrote:

dealtn wrote:

Gan020 wrote:[

I can only comment on UK gilts. They can be bought through your usual stockbroker in the same way as any other share. Just plug in the ticker and off you go. It's as easy as buying a share. An example is T24 which matures in September 2024. The spread is incredibly tight.

You cannot participate in new issues but with high liquidity and tight spreads that's not a problem

Been some years now since I was a market maker at a GEMM. Interested in your confirmation spreads are tight in the retail space, that certainly wasn't the case when I was in the market. The opposite in fact. I would be interested to hear what has changed and examples of those spreads.

I invested in gilts for years and always found the spreads tight enough not to worry about them, the exception being the smaller undated issues and also I've never traded index-linked.

GS

As I said I would be interested to hear what those spreads are now (or in the past). Spreads of 1%+ was what I imagined, which given < 0.1% is normal in the GEMM world (and until recently representing over a years worth of yield), always struck me as excessive.

I was under the impression you could register with Computershare for New Issues. They after all handle the register and new issues for the Bank of England after taking over the register, and some of the staff, from the Bank.

There used to be something called the Blackpool register which dates back to when NS&I where issuers for retail buyers, and I believe that in concept still exists. I used to have the url and form from the Computeshare site to register, it might be worth digging around and having a look to see if that exists or simply calling them.

If you are going to explore "Govs" you might also like to have a look at Uncle Jim's bond podcast, he used to work for the Bank I believe, but not when I was involved with them.

https://anchor.fm/jim833 - "By Jim There is nothing more fascinating than a fixed income instrument. Nothing. Listen to Jim transport you to a world of convexity, basis points, covenants and debt-to-gdp."

For professional investors only. No advice here. No mention of funds or products. Personal thoughts, not that of any employer.

https://www.computershare.com/uk/gilts - "Individuals wishing to join the Approved Group will need to satisfy the criteria established by the Registrar and DMO to meet their anti-money laundering obligations. You can find the appropriate forms, using the Downloadable Forms link below. Please note that due to current legislation, if you reside in an EEA Country or in the USA, you are not able to use the service to buy or sell Gilts.

We are now able to accept cheques for purchases of £1,000 or under. Please refer to the current Terms and Conditions on the Downloadable Forms page for further information on how to pay for your purchase if the amount is over £1,000."

On TN25 the real spread is ~ 0.2% that I have brought recently to park a property sale while await the crash. Worth getting a few quotes as seems to vary within seconds, even when gilt futures dont move. I can only guess the front MM is filled, then returns again as cant see the book

I looked at TR24 & TN24 and the trades seem to be in the range £400k - £20mn. Are gilts best avoided if buying substantially less, say £10s of k, what kind of minimum would avoid hefty spreads?

https://www.londonstockexchange.com/sto ... rade-recap
https://www.londonstockexchange.com/sto ... rade-recap

A minnow in a shark tank

gpadsa

For TN250 1/4% TREASURY GILT 31/01/25, the LSE is currently showing Bid / Offer as 92.62 / 93.62:

https://www.londonstockexchange.com/sto ... mpany-page

I recently bought T29 1/8% IDX-LKD TREASURY GILT 2029. The LSE is currently showing Bid / Offer as 98.52 / 101.02. The quoted spread was a little better at 2 points when I bought. I bought £50K over the telephone with iWeb. I paid about 0.5% above mid-market, so I traded at about half the quoted spread. I bought at a whisker above par and intend to hold to maturity. I have previously bought at about 0.25% above mid-market, so the price that I got this time was not the best.

GeoffF100 wrote:For TN250 1/4% TREASURY GILT 31/01/25, the LSE is currently showing Bid / Offer as 92.62 / 93.62:

https://www.londonstockexchange.com/sto ... mpany-page

I recently bought T29 1/8% IDX-LKD TREASURY GILT 2029. The LSE is currently showing Bid / Offer as 98.52 / 101.02. The quoted spread was a little better at 2 points when I bought. I bought £50K over the telephone with iWeb. I paid about 0.5% above mid-market, so I traded at about half the quoted spread. I bought at a whisker above par and intend to hold to maturity. I have previously bought at about 0.25% above mid-market, so the price that I got this time was not the best.

For comparison in the GEMM market, when I was there (so might be different now) a 2 year conventional would be 0.01 - 0.02 (so 1 to 2 cents) wide, 5 years not much wider. Index linked perhaps twice as wide again.

Even when dealing at (significantly) better than quoted prices, you are likely trading much wider than the insider market. Gilts aren't set up to serve retail investors at all well in my opinion (or at least weren't).

gpadsa wrote:I looked at TR24 & TN24 and the trades seem to be in the range £400k - £20mn

Looking at old posts I see a pertinent 2020 observation from dealtn viewtopic.php?p=336515#p336515

dealtn wrote:Gilts, and linkers, will trade several hundred times a day. The market place isn't on LSE so the very few you will see reported are unrepresentative. Without wishing to bore you with a long story it's probably best to dummy trade with your usual broker to see what is available to you.

Those £400k - £20mn trades I saw were indeed on LSE and I guess there is still no other place to see trades - will continue my investigations via dummy trades. Heartening so see both in that thread & the present thread GeoffF100 has been able to do trades without prohibitive spreads.

gpadsa

FWIW I bought £100k nominal of Treasury 0.125% 31/01/2024 (TN24) today at 96.538 through Hargreaves Lansdown as an online trade (did not need to phone). The bid/ask spread indicated on screen at the time was 96.02/97.02. I got quotes for amounts of 10k, 40k, 50k and 80k before accepting the quote for 100k. The price quoted for all trades was identical 96.538. Immediately after buying I obtained a few sell quotes, again for 10k, 40k, 50k 80k and 100k. Again the quoted price for all amounts was 96.37. So a spread of around 0.17.

Edit: ps, about 10 mins after I traded I could have bought more for around 96.4

hiriskpaul wrote:Edit: ps, about 10 mins after I traded I could have bought more for around 96.4 :(

Well I should have waited 3 days for the price to go down then - it was 96.5946 on Monday

0.0546 above the midway of LSE's 96.04 - 97.04 at the time maybe implying a spread of 2x that at 0.11, telephone dealing so I didn't feel I could tie up the dealer doing pre- & post-trade research

Thanks for publishing your research as it implies being a £10k gilt minnow is not financially ruinous - the market must be pretty liquid after all

gpadsa

Hi,

If I was a US based investor, I would like to park my cash in 3-month T-bills as they currently yield over 4% annually.
However we've established that I can't do that directly in the UK.

Do you think this fund would offer the exposure I'm looking for? That is, steady growth around 4+%pa, and no reason to fall in nominal terms?
(I'm fine to expose myself to dollar and FX risk.)

JPMorgan ETFs (Ireland) ICAV - BetaBuilders US Treasury Bond 0-3 Months UCITS ETF (BBM3)
TER 0.07%
The Sub-Fund seeks to provide an exposure to the performance of US Dollar-denominated fixed rate government bonds issued by the US Treasury with a remaining maturity of less than or equal to three months.

Secondary question:
What difference in exposure would you expect if I chose a fund with a slightly longer outlook, up to a year?
For example a fund that aims to provide exposure to the short end of the Treasury curve targeting the 0-1yr maturity range and to reduce interest rate risk as well as minimise credit risk

CFBLondon wrote:Hi,

If I was a US based investor, I would like to park my cash in 3-month T-bills as they currently yield over 4% annually.
However we've established that I can't do that directly in the UK.

A few years ago, I was using IB quite a lot. Had bought a lot of treasuries. They can do that.
https://www.interactivebrokers.co.uk/en ... securities