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  1. #1

    Gilts and how the interest rate affects them

    I have a UK gilt in both my ISA and my taxable portfolio, both are down quite significantly. These were purchased for me by a brokerage firm that was fully managing my portfolio. As I'm now trying to take control of this myself (via a much cheaper brokerage firm) I am looking at what affects the price of the gilts. Seeing as there appears to be a good chance of a rise in interest rates this year I'm wondering how this will affect their value. From what I can determine on Google it seems a rise in rates will negatively impact the price of the gilts. In this case I may feel I should cut my losses and sell.

    Any advice would be much appreciated.

  2. #2
    It is very difficult to predict the movement of all the moving parts of the global economy. Interest rates may rise gradually in the UK but although index-linked gilts will follow, there is no guarantee that ordinary gilts will follow or there may be a significant time lag.

    The better long term returns are most likely coming from equities so for me it then becomes a question of asset allocation and rebalancing to ensure I get the best return for the risk I want to take with equities. For this I am happy to place a large % of my portfolio with the Vanguard Lifestrategy - currently a mix of 40 & 60.

  3. #3
    The current price of Gilts will have already taken into account future interest rate changes that the market has anticipated.

    The value of a Gilt will also be affected by how close it is to maturity

  4. #4
    As mentioned above the market reacts to the likelihood of something happening in the future, it doesn't wait for it to happen. Hence...


 

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