Gilts verses Bank Deposit Accounts

[billG]

Hi,

The general consensus seems to be that:-
FSCS protected products offer higher yields than GILTS of the same maturity but do not have liquidity. If one of the FSCS protected providers goes bust it is not 100% clear how long it would be before your money is reimbursed. These accounts cannot be accessed from within a SIPP or stocks and shares ISA.
GILTS are liquid, have low yields and can be purchased inside a SIPP or stocks and shares ISA.

Thanks to everyone for your thoughts.
BillG

[Hariseldon58]

For the OP
How about Income Bonds from NS&I? All the safety of gilts , a 1.16% interest rate on what is an effectively ultra short gilt.

Does it for me for my ‘safe’ sterling holdings and I use US Treasuries ETFs for my other safety first bond holdings, I not so optimistic on the £ longer term ( I expect there may be upside short term though)

[GoSeigen]

A fair proportion of my portfolio is in stocks and want to offset that with some safe investment(s). Looking at short term (up to 5 years) UK government bonds

The gilts I purchased this time last year returned about 30% to date of sale. That is a stunning return as you say, but they were long-dated gilts which like shares carry considerable duration risk.

Since the OP wants a "safe" investment I don't think that speculating that rates will go down via long-dated bonds is likely to meet his needs. As you note you are carrying a lot of interest rate risk there. You could just as easily lose 30% in a year as make it, and interest rates are subject to unpredictable movements in either direction. And you are hardly being paid to wait either.

Just to be clear, my comment about "stunning" gilt returns was a subtle (too subtle it seems) reference to the incongruity of the OP which talks about short gilts and "stunning" returns. I suspect the OP may have made a typo or had some slightly different point to make because I'm not sure short gilt returns have been anything like stunning recently.

Let's have a look: the 2.75% 2024 has flatlined or fallen ever since 2016 when it was actually a medium bond. That means an investor's return has been roughly the 2.75% coupon rate, which is good compared to the bond's headline c1% yield over most of that period, but could you really call it "stunning"?

I was simply observing that if the OP, like me, had observed stunning returns then they must have been up at the long end of the yield curve, not in short gilts. I think my post made clear that I was NOT recommending those gilts to the OP, due to the duration risk not matching his requirements.


I hope that clears up any misunderstanding.


GS

[Walkeia]

I believe when people talk about equity and bond mixes they are usually referencing equity indices and overall bond markets such as an all Gilt ETF. The duration on the Gilt ETF would be much shorter than long gilts and consequently carry a lot less risk and also less volatility. However, it should be noted I believe the UK has one of the longest duration tenors globally due to the insatiable demand for long end Gilts driven by liability driven investors such as pension funds etc.