As several of you know, we are very new to investing (first equity bought 6 weeks ago). Our aim is to put our savings (about 24k or so) some where more useful than the banks, and our main goal is just steady accumulation of wealth, no fancy speculation or market bets etc. Some equities (individual stocks and tracker funds), some corporate bonds, and some gilts being the general idea.
We did a historic/comparative study looking at gilt prices (in 2005, 2006 and now). The previous dates chosen as to be outside of the financial crisis drama 2007-8 with interest rates at somewhat more "normal" levels.
We wanted to justify to ourselves that whilst the inclusion of gilts to our portfolio would be useful for purposes of balance, and as a class whose value may well rise if equity prices fall, due their current prices we think that a forthcoming purchase would be a mistake.
Prices / yields look worthwhile here:
2,5,8,10yr maturity gilts 14/03/05 4.50% interest
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2yr 4.5% treasury stk 2007 GB0034040740 99.540000 4.746283
5yr 4.75% treasury stk 2010 GB00B0330274 99.930000 4.763241
8yr 8% treasury stk 2013 GB0008921883 122.410000 4.770933
10yr 3% treasury stk 2015 GB0009031211 61.680000 4.863680
2,5,8,10yr maturity gilts 14/03/06 4.25% interest
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2yr 5% treasury stk 2008 GB0031734154 100.560000 4.654667
5yr 4.25% treasury gilt 2011 GB00B128F474 98.380000 4.526649
8yr 5% treasury stk 2014 GB0031829509 102.910000 4.570668
10yr 4% treasury gilt 2016 GB00B0V3WX43 95.720000 4.526649
but now..
2,5,8,10yr maturity gilts 21/04/18 (now!!) 0.5% interest
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2yr Treasury 4,3/4% 2020 (TS20) GB00B058DQ55 107.54 0.8300
5yr Treasury 2,1/4% 2023 (T23) Gilt GB00B7Z53659 105.89 1.1980
8yr Treasury 1.5% TG26 2026 GB00BYZW3G56 100.735 1.4510
10yr Treasury 6% 2028 GB0002404191 143.440 1.5890
purchase seems foolish, as all prices are above par, and one priced closest to par, TG26, has a duration (about 7.7) that even a small rise of interest rates will knock it's price further south.
I apologise that this may seem a simplistic question to you all, but we'd really appreciate some confirmation that our thoughts are moving on the right lines.
thanks Mel