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Gilts Question


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#1 Paul77

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Posted 16 January 2012 - 10:15 PM

Hi there,

I am trying to understand how the bonds market works, and I came to something I can't get, maybe someone here will help me?

See the document attached, T512 has maturity date 7 Mar 2012, 5%, currently trades at 100.640. From the source here on the 7th Mar I should get the redemption 100 + 2.5% = 102.5. So, if I buy at 100.640 today, it would give me almost 2% in two months? That's not possible, what I'm doing wrong?

#2 Paul77

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Posted 16 January 2012 - 10:19 PM

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#3 HPCGiraffe

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Posted 17 January 2012 - 08:40 AM

You are being quoted the clean price (i.e. excluding accrued interest). Accroding to the DMO, the dirty price on that particular gilt is 102.45 equating to a yield of 0.33%.

See http://www.dmo.gov.u...ts/Daily_Prices

#4 Paul77

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Posted 17 January 2012 - 11:00 AM

This would make sense, thanks for your reply!




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