With Bank Rate at 3.75% and the latest 3-month Treasury bill tender clearing at 4.02%, refinancing all 28 qualifying gilt issues onto rolling 3-month bills would save an estimated
£4.51bn
of interest over the next year.
The ten biggest prizes below account for £2.34bn of that.
The top ten
| Gilt | Coupon | Matures | Nominal in issue (£m) | Running yield | Spread vs bills | Saving next year |
|---|---|---|---|---|---|---|
| 6% Treasury Stock 2028 | 6% | 2028 | £20,731 | 5.84% | 142 bp | £302m |
| 4 3/4% Treasury Gilt 2043 | 4.75% | 2043 | £34,875 | 5.36% | 93 bp | £289m |
| 4 3/8% Treasury Gilt 2054 | 4.375% | 2054 | £32,128 | 5.53% | 111 bp | £281m |
| 5 1/4% Treasury Gilt 2041 | 5.25% | 2041 | £25,250 | 5.48% | 106 bp | £255m |
| 4 1/4% Treasury Gilt 2055 | 4.25% | 2055 | £28,320 | 5.50% | 107 bp | £235m |
| 4 3/4% Treasury Gilt 2035 | 4.75% | 2035 | £41,812 | 4.95% | 53 bp | £211m |
| 4 7/8% Treasury Gilt 2036 | 4.875% | 2036 | £32,907 | 5.07% | 65 bp | £204m |
| 4% Treasury Gilt 2060 | 4% | 2060 | £25,722 | 5.47% | 104 bp | £196m |
| 4 1/2% Treasury Gilt 2042 | 4.5% | 2042 | £29,019 | 5.17% | 75 bp | £189m |
| 4 3/4% Treasury Stock 2038 | 4.75% | 2038 | £28,206 | 5.11% | 68 bp | £179m |
Putting that in context
- £500m
- the UK Space Agency’s annual budget.
- £1bn
- a new Type 26 frigate.
- £2bn
- the annual winter fuel payments.
- £4bn
- an aircraft carrier.
Assumptions
- Bill yields are the average accepted yields on the latest 3- and 6-month tenders.
- The 3v6 forward is implied from the 3- and 6-month spot yields using simple interest on an actual/365 day count.
- The 6v9 and 9v12 quarters extrapolate the last observed step of the forward curve at a halving pace.
- The rolling annual 3-month bill yield of 4.42% compounds the four quarterly rates over 91.25-day quarters.
- The cut off for qualification is 25 basis points above the rolling annual yield.
- Every qualifying issue is assumed to pay a full year of coupons.
- There are 70 conventional gilt series in issue.
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