The coupon descriptions for Gilts

[TheMotorcycleBoy]

Hi all,

Could any of you help myself and Mel out in understanding gilt coupon listings (on the London Stock Exchange's website). Our understanding is that a gilt's coupon payouts are delivered as cashflows to the holder every 6 months, but that the coupon rate quoted is an annual figure. So for example for this "5% TR25" gilt

http://www.londonstockexchange.com/exch ... ml?lang=en

I'm assuming that we'd receive 2 coupons per year, each equally 2.5% of the par value of our holding. Certainly nothing in the webpage above contradicts that viewpoint, the bond information stating:

Coupon value: 5%
Coupon type: Fixed
Coupon frequency: 6 months

However when I view a different gilt listing, in this case "0 3/4% TG23", I'm confused. See:

http://www.londonstockexchange.com/exch ... ml?lang=en

The analogous data which I see for this gilt, being:

Coupon value: 1.5%
Coupon type: Fixed
Coupon frequency: 6 months

So for this gilt the listing "coupon value" is twice the figure given in the bonds actual name (where it says "0 3/4%"). Can someone explain what is happened here?

There's clearly some inconsistency. At first I guessed that the issues whose coupons are described as fractions in their names use the 6-monthly coupon rate (and that's why I see that twice the value is in the Stock exchange's description), but gilts without fractional specification (i.e. decimal) state the same figure in their name and their listing (i.e. the annual coupon rate). But I quickly blew out that theory once I saw this "1 1/2 TG21" gilt:

http://www.londonstockexchange.com/exch ... PUKGT.html

which uses a consistent figure in the name and in London stock exchange's bond information section.

Thanks Matt

[Alaric]

Hi all,

Could any of you help myself and Mel out in understanding gilt coupon listings (on the London Stock Exchange's website). Our understanding is that a gilt's coupon payouts are delivered as cashflows to the holder every 6 months, but that the coupon rate quoted is an annual figure. So for example for this "5% TR25" gilt

http://www.londonstockexchange.com/exch ... ml?lang=en

I'm assuming that we'd receive 2 coupons per year, each equally 2.5% of the par value of our holding. Certainly nothing in the webpage above contradicts that viewpoint, the bond information stating:

Coupon value: 5%
Coupon type: Fixed
Coupon frequency: 6 months

However when I view a different gilt listing, in this case "0 3/4% TG23",
The analogous data which I see for this gilt, being:

Coupon value: 1.5%
Coupon type: Fixed
Coupon frequency: 6 months

So for this gilt the listing "coupon value" is twice the figure given in the bonds actual name (where it says "0 3/4%"). Can someone explain what is happened here?

The Debt Management Office is another source of data on Bonds. The Bond in question is a relatively recent issue, so I looked up the issue price. The point being to find the yield at issue as that's near to the coupon if the issue price is around 100. The yields are consistent with the coupon being 3/4% a year.
https://www.dmo.gov.uk/data/pdfdatarepo ... Code=D2.1E

As to why a value of 1.5% is listed, that looks wrong. Perhaps the systems cannot cope with coupons below 1% and they've not been bothered to modify them.

[AleisterCrowley]

Interesting. My DMO pamphlet from 2012 says;

'A conventional gilt is denoted by its coupon rate and
maturity (e.g. 2% Treasury Gilt 2016). ..
The coupon indicates the cash payment per £100 nominal
that the holder will receive per year. This payment is made
in two equal semi-annual payments on fixed dates six
months apart'
https://www.dmo.gov.uk/media/14971/mb13062012a.pdf

[TheMotorcycleBoy]

Hmm... I can only imagine that it's a typo, on the part of the administrator of the site. If I'm correct then it would be better if such public information was better reviewed...

Well perhaps I'll get a user account at the London Stock Exchange web site, and inform/report/ask someone about it. Will maybe post back with a definitive answer in a few days/week, unless another member here clarifies first.

Matt

[AleisterCrowley]

They've got a Contact Us form that doesn't (appear to) require registration
http://www.londonstockexchange.com/exch ... ct-us.html

[Bluestone77]

For TG23, I also notice that the coupon ex date is
31 Dec 2099 !

[TheMotorcycleBoy]

For TG23, I also notice that the coupon ex date is
31 Dec 2099 !

Wow!

Perhaps I'm the victim of some kind of belated April Fools joke?

[GoSeigen]

However when I view a different gilt listing, in this case "0 3/4% TG23", I'm confused. See:

http://www.londonstockexchange.com/exch ... ml?lang=en

The analogous data which I see for this gilt, being:

Coupon value: 1.5%
Coupon type: Fixed
Coupon frequency: 6 months

So for this gilt the listing "coupon value" is twice the figure given in the bonds actual name (where it says "0 3/4%"). Can someone explain what is happened here?

The londonstockexchange.com site is a secondary source of information. Always check anything you are relying upon against a primary source.

GS

[TheMotorcycleBoy]

However when I view a different gilt listing, in this case "0 3/4% TG23", I'm confused. See:

http://www.londonstockexchange.com/exch ... ml?lang=en

The analogous data which I see for this gilt, being:

Coupon value: 1.5%
Coupon type: Fixed
Coupon frequency: 6 months

So for this gilt the listing "coupon value" is twice the figure given in the bonds actual name (where it says "0 3/4%"). Can someone explain what is happened here?

The londonstockexchange.com site is a secondary source of information. Always check anything you are relying upon against a primary source.

GS

Would the primary source be somewhere in here: https://www.dmo.gov.uk ?

[AleisterCrowley]

Yes, that's my understanding.
Probably around here (Gilt Issuance History)

https://www.dmo.gov.uk/data/pdfdatarepo ... Code=D2.1E

Your particular example, looking up the ISIN
There was a block sold at near-par, slight discount
0¾% Treasury Gilt 2023 GB00BF0HZ991 20-Jul-2017 Outright 99.88 0.769%
Near as dammit 0.75%

[GoSeigen]

The londonstockexchange.com site is a secondary source of information. Always check anything you are relying upon against a primary source.

GS

Would the primary source be somewhere in here: https://www.dmo.gov.uk ?

Yes, much better, as DMO are the issuer, try the first link on this page for instance:

https://www.dmo.gov.uk/data/gilt-market/gilts-in-issue/


The issue documentation is best, e.g. announcement of issue:

https://markets.ft.com/data/announce/detail?dockey=1323-13292845-0M2NJ9F4NUNENQTI9NNH7ILUCC


In the case of gilts you could also refer to market yield on the date of issue: six-year yield was pretty close to 0.75% on that date.


GS