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How to understand Index Linked UK Govt Bonds (your help, please)
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MBA MBA
Posted: 08 January 2025 10:08:16(UTC)
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This one is for those of us who 'get' non linkers but now want to understand linkers and anyone kind enough to help us (thank you).

This post is motivated by my altered strategy of selling down holdings in multi asset funds in favour of uk gilts, mainly in ISA (some in GIA), to offset a very large mortgage without actually paying down the mortgage.

Someone kindly shared this website, cant recall who, possibly the great Tim D...

Inflatoin Linked Gilts yieldgimp

On the above website what do the following mean (please talk to me as i am a lay person / dummy):

1. 'breakeven RPI growth'

2. BASE RPI

3. Index ratio

4 Yield 'real' (this the interest rate, right? ie RPI + the yield)

5. Implied RPI at maturity

If I buy TR28...

6) is the annual return (as RPI stands at present) the figure of 3.92% in 'breakeven RPI growth'?

7) If yes to 6, is that the case even if I buy at 98.93?

8) And the yield is RPI plus 0.43%, right?

9) How is RPI calculated? ONS? And is it a rolling average every month of set once a year ie on Jan 1 2025 ONS says RPI is 4% so that's the static figure used for another 12 months.



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4 users thanked MBA MBA for this post.
SF100 on 08/01/2025(UTC), Guest on 08/01/2025(UTC), ALAN P on 08/01/2025(UTC), dlp6666 on 10/01/2025(UTC)
SF100
Posted: 08 January 2025 10:54:00(UTC)
#2

Joined: 08/02/2020(UTC)
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Try scrolling down to bottom of yieldgimp's page.
Most of the terms are defined there.
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MBA MBA
Posted: 08 January 2025 15:12:54(UTC)
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SF100;330394 wrote:
Try scrolling down to bottom of yieldgimp's page.
Most of the terms are defined there.


Ah yes thanks - doesn’t show on my iPhone but does on my desktop browser. Thanks.
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Thrugelmir
Posted: 08 January 2025 17:29:51(UTC)
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Debt Mangement Office provide a guide

https://www.dmo.gov.uk/media/1sljygul/yldeqns.pdf
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MBA MBA on 09/01/2025(UTC)
ben ski
Posted: 08 January 2025 18:56:02(UTC)
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I'd also recommend sign up for a free account on GPT:
https://chatgpt.com

It's not only this place that's bad with bonds, but a lot of financial journalism really does a bad job of explaining or understanding them. ChatGPT will explain clearly, and you can have a conversation and ask every question, until you feel you've fully grasped them.
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4 users thanked ben ski for this post.
Mr TIPS on 08/01/2025(UTC), ALAN P on 08/01/2025(UTC), MBA MBA on 09/01/2025(UTC), dlp6666 on 10/01/2025(UTC)
Jed Mires
Posted: 08 January 2025 18:56:49(UTC)
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[quote=MBA MBA;330387]This one is for those of us who 'get' non linkers but now want to understand linkers and anyone kind enough to help us (thank you).

7) If yes to 6, is that the case even if I buy at 98.93?


The £98.93 is the clean price, the price you will pay will be around £138.5 {it includes the inflation protection accrued so far}.
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MBA MBA on 09/01/2025(UTC)
MikeT
Posted: 08 January 2025 20:21:41(UTC)
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Some of the longer duration linkers are now returning a real yield of over 2%.
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MBA MBA on 09/01/2025(UTC)
tudor a davies
Posted: 09 January 2025 19:44:50(UTC)
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Can you clarify, looking at todays yieldgimp that if I buy, for example, £5,000 of TR 46 and hold the 21 odd years to maturity I will receive my initial investment plus RPI plus 2% pa? I currently still have NS&I index linked bonds which of course are tax free but have a lower real return %. If held in an isa the IL gilt would therefore be the better option?

Thanks.
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1 user thanked tudor a davies for this post.
Newbie on 09/01/2025(UTC)
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