UK Long gilt futures - which gilt?

[SanMiguel]

My broker has the long gilt futures contract but which actual bond does this refer to?
Am I right in assuming that futures contracts do not pay out coupons/dividends...only the daily rolling contracts pay out dividends?

 

[arabianights]

It refers to a notional ten year gilt, not an actual issued gilt.

Suggest you do more research on fixed income before touching this.

 

[SanMiguel]

It refers to a notional ten year gilt, not an actual issued gilt.

Suggest you do more research on fixed income before touching this.

I'm not intending to buy bonds especially not at this stage - just wondering which it referred to.
Was considering an investment portfolio of 25% gold, 25% index, 25% bonds, 25% cash.

 

[Martinghoul]

Well, in theory, it does refer to a particular bond, called the CTD (which is the bond you're likely to get delivered if you hold on to the contract to maturity). The current CTD for the front long gilt contract (Sep10) is the 8 21s, i.e. UKT 8% 7-Jun-2021. And no, you don't get the coupons when you hold the futures.

 

[SanMiguel]

Well, in theory, it does refer to a particular bond, called the CTD (which is the bond you're likely to get delivered if you hold on to the contract to maturity). The current CTD for the front long gilt contract (Sep10) is the 8 21s, i.e. UKT 8% 7-Jun-2021. And no, you don't get the coupons when you hold the futures.

The futures market is just for capital appreciation/depreciation then?
Is there anyway to get exposure to a gilt through leverage? Presumably no-one offers it because at 3% libor and a gilt offering more in coupon value, the investor would just hold it.

 

[scose-no-doubt]

the futures market is just for capital appreciation/depreciation then?
Is there anyway to get exposure to a gilt through leverage? Presumably no-one offers it because at 3% libor and a gilt offering more in coupon value, the investor would just hold it.

cfd?

 

[arabianights]

Well, in theory, it does refer to a particular bond, called the CTD (which is the bond you're likely to get delivered if you hold on to the contract to maturity). The current CTD for the front long gilt contract (Sep10) is the 8 21s, i.e. UKT 8% 7-Jun-2021. And no, you don't get the coupons when you hold the futures.

This may mark me out as a pevert of pedantry, but the mere fact there is a CTD at all says it ain't referring to a particular bond

 

[arabianights]

The futures market is just for capital appreciation/depreciation then?
Is there anyway to get exposure to a gilt through leverage? Presumably no-one offers it because at 3% libor and a gilt offering more in coupon value, the investor would just hold it.

Where you get idea libor was 3%?

And yes, there are ways to gain exposure to gilts through leverage.

 

[Martinghoul]

The futures market is just for capital appreciation/depreciation then?
Is there anyway to get exposure to a gilt through leverage? Presumably no-one offers it because at 3% libor and a gilt offering more in coupon value, the investor would just hold it.

Well, I don't know who'd offer you personally the ability to leverage.

The coupon doesn't matter. It's yield that counts when you buy a bond and 8s 21s are yielding arnd 3.3% at the mom. They're smth like -11bps on asset swap (i.e. more expensive), which is the relevant number when comparing against LIBOR, as you're doing.

 

[SanMiguel]

Where you get idea libor was 3%?

And yes, there are ways to gain exposure to gilts through leverage.

Presumably not through any of the standard CFD/SB brokers?
Presumed financing rate on open daily bets worked out to be around 3%.

cfd?

No, it;s still a futures contract hence no payouts.

Well, I don't know who'd offer you personally the ability to leverage.

The coupon doesn't matter. It's yield that counts when you buy a bond and 8s 21s are yielding arnd 3.3% at the mom. They're smth like -11bps on asset swap (i.e. more expensive), which is the relevant number when comparing against LIBOR, as you're doing.

Agreed but again, no payout on futures.

 

[Martinghoul]

This may mark me out as a pevert of pedantry, but the mere fact there is a CTD at all says it ain't referring to a particular bond

Firstly, yes, you are a pervert of pedantry (as well as a pedant of perversion, to boot), but we knew it already . Secondly, the future does refer to a basket of deliverable bonds, with the CTD being the first among equals, so to speak. Which one of us then is technically correct, I am not sure...

 

[Martinghoul]

Presumably not through any of the standard CFD/SB brokers?
Presumed financing rate on open daily bets worked out to be around 3%.

No, it;s still a futures contract hence no payouts.

Agreed but again, no payout on futures.

So what exactly is it that you're looking for then?

 

[SanMiguel]

So what exactly is it that you're looking for then?

Some way to trade a portfolio on leverage that accounts for at least a little of the financing costs.
25 % indexes preferably with a dividend payout
25% bonds preferably with a yield payout/coupon
25% gold
25% cash

Of course the traditional way to do this is hold it all in actual funds rather than leveraged funds but that's tieing up cash that I might or might not need for the next few years. Obviously, I would have to take into account a potential loss on the entire leveraged portfolio (but it's balanced a little for that) and wouldn't want to overleverage both this investment and any of the remaining cash as that would be way too risky.

 

[MrGecko]

I'm not intending to buy bonds especially not at this stage - just wondering which it referred to.
Was considering an investment portfolio of 25% gold, 25% index, 25% bonds, 25% cash.

You would be better off trading a UK Soverign ETF IMO.

 

[Martinghoul]

Some way to trade a portfolio on leverage that accounts for at least a little of the financing costs.
25 % indexes preferably with a dividend payout
25% bonds preferably with a yield payout/coupon
25% gold
25% cash

Of course the traditional way to do this is hold it all in actual funds rather than leveraged funds but that's tieing up cash that I might or might not need for the next few years. Obviously, I would have to take into account a potential loss on the entire leveraged portfolio (but it's balanced a little for that) and wouldn't want to overleverage both this investment and any of the remaining cash as that would be way too risky.

Would you like fries with that, sir ?

In all seriousness, I just don't see how you can satisfy so many different criteria in one fell swoop.

 

[SanMiguel]

You would be better off trading a UK Soverign ETF IMO.

FOr bonds you mean, like a corporate bond ETF or gilt ETF?
I guess I could find a fund with discount to NAV but suspect there aren't many in the bond arena.

Would you like fries with that, sir ?

In all seriousness, I just don't see how you can satisfy so many different criteria in one fell swoop.

Lol, possibly. Perhaps it would be better to keep the leverage part of the portfolio to gold and an index and then put real cash into bonds. The portfolio is the balanced once a year or anytime one of the holdings gets to a certain percentage level.

 

[MrGecko]

For all of them really.

 

[SanMiguel]

For all of them really.

Isn't there an advantage to using a leveraged bet on say the FTSE rather than putting all the money into a index tracker in the fact that you free up some cash?
Financing costs would either be balanced by dividend payouts, which is a shame but futures would have less financing costs and no dividends.
The 25% in cash for the investment could be used to time markets thereby increasing revenue for the portfolio?

 

[SanMiguel]

INXG can be bought on margin but the yield to mat on this is about 1%, not brilliant considering I'd probably be buying at the top of the bull run in bonds.