Bonds

[ryebank]

Hi,

I have some questions about bonds and was wondering if someone on here could maybe shed some light...

1) Is it possible to raise money for a business/investment opportunity by selling gilts and investing that money elsewhere whilst repaying only the interest or a mixture of interest and principle semi-annually?

2) Can you sell any amount of gilts £100, £2450, 100k or are they in block of 10k 50k etc

3) If I did sell 100k worth of gilts which expired on the 7th December 2011 what happens on the maturity date. Do I have to repay the principle and any outstanding interest or could I roll the position onto the next 1 yr gilt

4) If the 1y gilt expires on the 7th Dec will there be another issue to replace it?

5) If I wanted to buy a 1y gilt from today, which would expire in 1 years time will the interest rate I receive/pay be interpolated between the 1y (07/12/11 - 3.25) and 2y (07/03/13 - 4.5), as the maturity date will arrive before the 2y expiration date (07/03/2013)?

6) Can anyone recommend a broker who specialises in Bond trading?

Any info is much appreciated…

Rye

 

[anley]

YOu can't sell Gilts only the government can. A gilt is a government bond.

 

[Martinghoul]

1) You can short sell gilts if you have repo facilities. You certainly cannot borrow from the mkt at the same rate as Her Majesty's Treasury by selling gilts in the mkt, as anley mentioned.

2) Gilts can, in theory, be traded in pieces that are as small as a penny. That's what the DMO says, but note that this is the theory. In practice, it's up to your counterparty/broker to decide what they will and won't quote.

3) It's difficult to be short a bond close to maturity date, since people don't like to lend them in repo. In general, you'll be liable for the redemption and coupon.

4) There's a whole lot of different gilts out there. There's always a 1y gilt or nearby, but it's not the same bond. It rolls.

5) Yes.

6) Unless you're an istitution, you can't short bonds with a regular broker. I am not aware of any brokers that would offer such a service. Ultimately, you're just looking for someone to lend you money. Brokers aren't in the money-lending business.

 

[ryebank]

Thanks for the replies

I guess you are right Martinghoul, i'm just looking for a way to borrow money. Is there any instrument in the Money market which could help me to do that, after all isn't that what the money markets are for?

 

[Martinghoul]

Thanks for the replies

I guess you are right Martinghoul, i'm just looking for a way to borrow money. Is there any instrument in the Money market which could help me to do that, after all isn't that what the money markets are for?

Yes, but money mkts aren't there to allow you to borrow money. They exist for the sake of the institutions. The only way to borrow money is to go to the bank and take out a personal loan. The rate you get provides you a measure of your credit risk.

 

[ryebank]

Unterstood thanks again

 

[anley]

Expect to pay a minimum of about 8% for a personal loan and probably slightly more for a company one and then the bank would probably want a personal guarantee from you.

If you apply for a personal loan then you'll only get one if your credit rating is good, and I mean really clean. Otherwise you'll probably be refused.

Guys, having a clean credit rating is so so important. Why? because if offers you financial options whether you want to use them or not. Conversly with a dirty credit rating (or incorrect one, which could be made correct) you'll have virtually no financial options.

All this crappy talk about financial education is schools and NOBODY ever talks about the importance of your credit file. That should be the number one starting block otherwise everything else is a waste of time. To summarise - Most personal finance topics hinge on your credit rating.....

 

[haddoxerik]

A bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.