Reinvestment Of A Redeeming Gilt

[aletta]

The DMO has handed over gilt management to Computershare,but can they do gilt reinvestment at maturity with me sitting in a rice field in Thailand.

[Diggerbasher]

It depends on whether you have joined the approved group of investors.The legislation came in in 2003 to counter money laundering under false identities.It's a real pain,certified copies of passport etc.

What part of the yield curve are you looking to reinvest into and what are your views on the future curve gradient?Rates topping out or more to go?

[aletta]

Talk about a flat yield curve.If you knock off sub one year paper you've got roughly 4.25 all the way up to thirty years.Be mad to lock in too far out on the curve and one year rates are crap.Think i will come out of gilts and into a internet tracker,with bonus you can get around 5.4%.Got to pay tax but still gives 4.4%.Plus you're in on any further rise if recent data is just a blip and not a change of trend.I don't fear the downside potential as a cut in rates would only send the UK housing market flying again.

Edited June 10, 2005 by aletta

[Diggerbasher]

Have you thought about putting your money in Thai government bonds?

I certainly would not touch any of the corporate paper.

[aletta]

Have you thought about putting your money in Thai government bonds?

The only bods who put money in Thai govies are the Thai institutions who are not allowed to invest internationally.Hence you have huge pools of domestic Baht hunting a home and this enormous liquidity mullers rates.Take a look at the rates:

Thai Govt Bond Rates

Two year at 3.15 and five at 3.53,thats a joke.That's 100 and 70 basis points under UK gilts on emerging market debt with the government about to borrow a trillion baht for mega projects.If you lock in out on the curve, you're going to get rodgered when the liquidity is dried up and rates spike up.Where's the risk premium for third world paper and a government about to go nuts with the cheque book.