Investment

[motorbiking]

TN28 and TG30 look like they fit my needs

 

[JohnD]

I'm sure I saw them mentioned recently

 

[Justin Passing]

TN28 and TG30 look like they fit my needs

As mentioned in the stockmarket thread, and a few posts ago

I'll type it again slowly...
Be careful about when you buy them.

The Coupon , which may be 0.5% or 8%* (etc) is the saving-interest taxed return, on what you get on the bond at value 100.
You get 100 when the thing matures, in whatever, maybe one year or maybe anything, maybe 20 years time
Say the SONIA/B of E (money Market) rate is 5%

0.5% is way below, so the price of a bond maturing in 1 year is likely to be about 96. You pay £96.
Then, you get the 0.5% (on 100) plus a gain of 4 on 96, which is just over 4%.

You might expect a straight line between now and maturity, but for anything other than very short "Duration" to maturity, that's not what you get, it's going to wiggle about a lot, or make a curve up or down.

If interests are rising, the bond price falls, so you're better off with your cash in something predictable and liquid.
If you look at the graph for TG30, the price has been dropping , to around about now, in the past year:

If you held he cash in the CSH2 ETF, you'd have made a steady gain of about 4% (less tax)
whereas if you'd bought TG30, you would be 1% down.

Since you're only trying to win about 5%, that's a huge mistake.
The price is shifted by supply and demand, and sentiment, and whether the bank buys the bonds itself.

As expected the US FED has held their rate ( - ahead of the Mid-Term elections) and when they hike it later. Both will affect it a little, but it's impossible of course to estimate accurately whether TG30 is at a bottom right now. You have to decide whether the rate you're locking in is acceptable.
If the price does drop between now and maturity, you would not get your money back if you had to sell.

If the light blue line looks pretty attractive ( remember it's going top be shallower due to tax) compared with where you think the orange one is going to go, then you could hold back on some of the investment and pick your moment.

TG30 has 4 years to run, TN28 has only 15 months, so as expected the dark blue trace for TN28, curve is already on a track to get you the expected return.
4.2%, less the 40% tax, is 2.52%, at the current highest 45% rate it's 2.31%.
TN28 lies between them overall, but since March it has been doing better.

A snag with the longer dated treasury bonds is that their value would drop a lot if interest rates rose a lot. John's TR31, 5 years out could be inconvenient if you needed access to the money, giving you back less than you paid. If you look back a few posts you'll see TG31, and its determined fall in price. The bottom line is perhaps, don't buy in to your ladder too early.
You can't set the capital loss against gains, natch.

In the case of higher rates/inflation, there are index linked (tax free) bonds, or, traditionally but dog knows these days, "defensive" equities (not military defence) like commodities, property, consumer staples, big boring companies, and maybe gold.

* If the coupon is higher than the current interest rate, you'd be paying a premium for your £100 quid bond, maybe £104.

 

[Highway Man]

and maybe gold.

Probably as much as I understood this Justin. I read all of everyones posts on here but it really does go above my head. How anyone understands this is certainly cut from a different cloth.

 

[Justin Passing]

Probably as much as I understood this Justin. I read all of everyones posts on here but it really does go above my head. How anyone understands this is certainly cut from a different cloth.

Put it down to lousy teaching!

As you highlit gold, it's just something which might be expected to keep its REAL value in times of inflation. Property is supposed to do the same.

 

[JohnD]

The more recent TG30 chart might suggest it hit a trough in September, and is now climbing out.

Today's closing price £0.8389
You can add to the chart.

 

[JohnD]

The more recent TG30 chart might suggest it hit a trough in September, and is now climbing out.

And as an investor, one of your objectives is to buy things when they're cheap, not when they're expensive.

 

[Dereekoo]

Help, I go on a cruise for a fortnight and come back to over 150 posts to catch up on

 

[motorbiking]

As mentioned in the stockmarket thread, and a few posts ago

I'll type it again slowly...
Be careful about when you buy them.

The Coupon , which may be 0.5% or 8%* (etc) is the saving-interest taxed return, on what you get on the bond at value 100.
You get 100 when the thing matures, in whatever, maybe one year or maybe anything, maybe 20 years time
Say the SONIA/B of E (money Market) rate is 5%

0.5% is way below, so the price of a bond maturing in 1 year is likely to be about 96. You pay £96.
Then, you get the 0.5% (on 100) plus a gain of 4 on 96, which is just over 4%.

You might expect a straight line between now and maturity, but for anything other than very short "Duration" to maturity, that's not what you get, it's going to wiggle about a lot, or make a curve up or down.

If interests are rising, the bond price falls, so you're better off with your cash in something predictable and liquid.
If you look at the graph for TG30, the price has been dropping , to around about now, in the past year:

View attachment 425403

If you held he cash in the CSH2 ETF, you'd have made a steady gain of about 4% (less tax)
whereas if you'd bought TG30, you would be 1% down.

Since you're only trying to win about 5%, that's a huge mistake.
The price is shifted by supply and demand, and sentiment, and whether the bank buys the bonds itself.

As expected the US FED has held their rate ( - ahead of the Mid-Term elections) and when they hike it later. Both will affect it a little, but it's impossible of course to estimate accurately whether TG30 is at a bottom right now. You have to decide whether the rate you're locking in is acceptable.
If the price does drop between now and maturity, you would not get your money back if you had to sell.

If the light blue line looks pretty attractive ( remember it's going top be shallower due to tax) compared with where you think the orange one is going to go, then you could hold back on some of the investment and pick your moment.

TG30 has 4 years to run, TN28 has only 15 months, so as expected the dark blue trace for TN28, curve is already on a track to get you the expected return.
4.2%, less the 40% tax, is 2.52%, at the current highest 45% rate it's 2.31%.
TN28 lies between them overall, but since March it has been doing better.

A snag with the longer dated treasury bonds is that their value would drop a lot if interest rates rose a lot. John's TR31, 5 years out could be inconvenient if you needed access to the money, giving you back less than you paid. If you look back a few posts you'll see TG31, and its determined fall in price. The bottom line is perhaps, don't buy in to your ladder too early.
You can't set the capital loss against gains, natch.

In the case of higher rates/inflation, there are index linked (tax free) bonds, or, traditionally but dog knows these days, "defensive" equities (not military defence) like commodities, property, consumer staples, big boring companies, and maybe gold.

* If the coupon is higher than the current interest rate, you'd be paying a premium for your £100 quid bond, maybe £104.

Yes this was a perhaps knee jerk reaction to the budget sting. The alternate solution is some low risk, low dividend ETFs with traditional capital gains, which I can defer until I am a foreign resident paying a flat 7%. But CSH2, is treated as interest on savings not capital growth. So its subject to 49% tax on the growth.

 

[JohnD]

Help, I go on a cruise for a fortnight and come back to over 150 posts to catch up on

No need.

 

[motorbiking]

Put it down to lousy teaching!

As you highlit gold, it's just something which might be expected to keep its REAL value in times of inflation. Property is supposed to do the same.

At least with (investment) property, you can push your income back in as investment to defer the tax.

 

[Dereekoo]

No need.

Right I am off to the pub instead , thanks

 

[pete01]

Right I am off to the pub instead , thanks

Bit early, give it till 11

 

[Ihavenojob]

And as an investor, one of your objectives is to buy things when they're cheap, not when they're expensive.

I sometimes watch coin shop videos on YouTube, they are mainly American. Earlier this year, or the back end of last when silver was at an all time high, someone came in and bought $100,000 of silver Eagles (1oz silver coins) . The owner did try and talk them out of it. I bet they wish they had listened.

 

[Dereekoo]

Bit early, give it till 11

It was 2hrs in front in the Med so attuned to 9.00 drinking