Jump to content
House Price Crash Forum

Uk Government Bond Yields


Recommended Posts

0
HOLA441

Most discussions always seem to centre round the US Treasury yield which, to be fair is still the de facto benchmark for global borrowing costs, but what of the Uk yields?

I have just made the first check in ages. Ok, not the best/most reliable source of specialist/in depth information anymore these days......but as a rough and ready indicator good enough for the moment.

Putting aside the ludicrousness of why anyone would invest at 4.5-ish percent till 2055, I note with real interest (crude pun intended!) that some of the very near dated bonds have yields near or above 7%.

A sign of what is coming round the corner for Joe (and Joanna) Bloggs vis a vis mortgage rates??

http://newsvote.bbc.co.uk/1/shared/fds/hi/...ilt/default.stm

Link to comment
Share on other sites

1
HOLA442
2
HOLA443

Very likely.

the problem has been a bloat. Governments all over the shop have tried to tinker to keep it bloated through imaginary resources, causing ultimately, inflation, which will sort out the flatulence well and truly. However, they will also come to the end of being able to extend their imaginary resources since the fallible will have had their imaginations stretched just a little too far. At which point a genuine, market driven cycle of readjustment will occur and they will, when facing the mirror, discover that they are human and tatty round the edges, not, as they had thought, glowing balls of light. It will be a bad shock but they will blame the mirror.

Link to comment
Share on other sites

3
HOLA444

Anyone who thinks we will have a UK base rate below 1% for the next two years is in La La La land. Its a short term measure, this time next year anything between 2.5% and 5%, much dependent on whether its small incremental due to inflation expectations? :ph34r: OR an unforseen event, you know, it was not seen coming again? :ph34r:

Link to comment
Share on other sites

4
HOLA445
I have just made the first check in ages. Ok, not the best/most reliable source of specialist/in depth information anymore these days......but as a rough and ready indicator good enough for the moment.

Putting aside the ludicrousness of why anyone would invest at 4.5-ish percent till 2055, I note with real interest (crude pun intended!) that some of the very near dated bonds have yields near or above 7%.

The BBC website that you quoted calculates the 'wrong' yield. For example, the 9% conversion loan 2011, which the BBC quotes at 7.86% actually yields 1.57%.

The 1.57% is the 'yield to maturity' - i.e. the total amount of income and capital returned when the bond matures if bought today. The 7.86% is the 'income yield' i.e. how much interest you get, excluding any capital gains/losses because you paid more or less than the face value of the bond.

To clarify: to buy £100 of '9% conversion loan 2011' would cost £114.55. That bond would produce income of £9.00 per year, but when it matures in 2011, would only return £100 of capital. So, although you get a generous income stream, you are forced to take a capital loss - overall, the total income would be equivalent to an AER of 1.57%

Edited by ChumpusRex
Link to comment
Share on other sites

5
HOLA446
The BBC website that you quoted calculates the 'wrong' yield. For example, the 9% conversion loan 2011, which the BBC quotes at 7.86% actually yields 1.57%.

The 1.57% is the 'yield to maturity' - i.e. the total amount of income and capital returned when the bond matures if bought today. The 7.86% is the 'income yield' i.e. how much interest you get, excluding any capital gains/losses because you paid more or less than the face value of the bond.

To clarify: to buy £100 of '9% conversion loan 2011' would cost £114.55. That bond would produce income of £7.86 per year, but when it matures in 2011, would only return £100 of capital. So, although you get a generous income stream, you are forced to take a capital loss - overall, the total income would be equivalent to an AER of 1.57%

ChumpusRex, if you chipped in a bit more on the Gilts Thread, life would be complete. cracking insight as always

Link to comment
Share on other sites

6
HOLA447
7
HOLA448
The BBC website that you quoted calculates the 'wrong' yield. For example, the 9% conversion loan 2011, which the BBC quotes at 7.86% actually yields 1.57%.

The 1.57% is the 'yield to maturity' - i.e. the total amount of income and capital returned when the bond matures if bought today. The 7.86% is the 'income yield' i.e. how much interest you get, excluding any capital gains/losses because you paid more or less than the face value of the bond.

To clarify: to buy £100 of '9% conversion loan 2011' would cost £114.55. That bond would produce income of £9.00 per year, but when it matures in 2011, would only return £100 of capital. So, although you get a generous income stream, you are forced to take a capital loss - overall, the total income would be equivalent to an AER of 1.57%

Darn it!

Why did you have to go and spoil everything...I was just planning my early retirement income on the basis of his figures ;)

Link to comment
Share on other sites

8
HOLA449
Anyone who thinks we will have a UK base rate below 1% for the next two years is in La La La land. Its a short term measure, this time next year anything between 2.5% and 5%, much dependent on whether its small incremental due to inflation expectations?

From where are you getting your numbers?

Link to comment
Share on other sites

9
HOLA4410
From where are you getting your numbers?

Looks like a Panda guess to me, my guess would be a continuation of the near zirp for the foreseeable future - Whilst the economy remains weak and distressed commercial and domestic real estate debt remains on the balance sheets of the banks, BoE generated increases in interest rates are a long way off.

Link to comment
Share on other sites

10
HOLA4411

I would have thought that rates would stay close to zero for quite some time.

Seeing as QE has been used in order to get 'lower than zero' interest rates - essentially forcing money out into the economy - I would expect the BoE to reverse QE before they start increasing base rates.

If they start ramping interest rates, before QE, then they end up taking big losses on the QE programme; as the BoE have said they won't allow these losses to devalue Sterling, these losses will have to be paid by the taxpayer - in effect, the Govt will have to pay £billions to the BoE who will then burn it.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    • No registered users viewing this page.




×
×
  • Create New...

Important Information