Interactive Investor

Fixed income trades surge 879%

28th June 2023 10:09

by Sam Benstead from interactive investor

Share on

interactive investor examines the increase in fixed income trades on its platform, and outlines the most popular buys among ii investors.

Upgrade 600
  • Investors choosing short-duration gilts set to mature in the next few years as interest rates have pushed higher

Higher interest rates can have knock-on effects for bond yields, sending them higher due to bond prices falling. In fact, over the last two weeks, short-term gilt yields have now surpassed the levels reached after the mini-Budget.

interactive investor (ii), has seen much greater interest in all things bonds related in recent months, as rising yields has meant that they have started to offer a genuine alternative to equities. 

For example, looking at direct fixed income trades on the ii platform by value this year-to-date (of which 95% were gilts), ii has seen a staggering 879% increase year-on-year compared to the same period last year.

Below, interactive investor, the UK’s second-largest investment platform for private investors, explores the increase in fixed income trades on its platform, and outlines the most popular buys with ii investors. 

Bonds are capturing the interest and attention of more investors

The increased interest is translating into Google searches and searches through the interactive investor website. For example, traffic to the ii bonds website pages in the last 16 months is up 2,545% (these are click-throughs from Google when terms such as ‘ii bonds,’ ‘buy bonds,’ and ‘buy gilts’ are searched.)

In July 2022, ii made the editorial decision to increase its content and research on bonds and money market funds, as yields began to look more interesting. ii wants to ensure there is relevant, engaging, and responsible content to guide investors through the often-complicated world of fixed income investing.

This also includes entry level content; including a beginner’s guide to bond funds and bonds (corporate and government), why they might be worth considering, which bonds are the least and most risky, what is a gilt, and much more.

Which gilts are ii investors buying?

Sam Benstead, Deputy Collectives Editor at interactive investor, explains:“Investors are buying up gilts set to mature in the next couple of years, with bonds maturing in 2024, 2025, and 2023 as the three most popular choices. This suggests investors are holding the gilts to maturity, locking in yields of more than 5%.    

“Given that TN24, TN25, and TG23 are low coupon bonds trading below par, most of the returns will come when the gilt pays back its £100 principle on maturity. This capital gain is tax free, making these gilts especially attractive for investors who have used up their ISA allowance. Cuts to the tax-free capital gains allowance are making gilts an even more effective way of reducing tax bills. 

“One gilt that stands out is TG61, a bond with just under 40 years until it matures. Long-dated bonds are most sensitive to changes in interest rates, and so will generally fall in value the most when rates rise, but rise the most when they fall.  

“The popularity of this bond suggests that some investors could be betting that interest rates will fall faster than the markets expect and hope to sell the gilt for a capital gain before it matures. This is also tax free. Note that income paid by gilts is taxed if held outside an ISA or a SIPP – and note, also, that there are never any guarantees.

“Investing in fixed income directly requires careful research, and an alternative would be money market funds, which offer the income of gilts, but without the complexity, while also mitigating the risk of bond price fluctuation – but it’s still important to do your homework."

The most-popular gilts on the interactive investor platform over the year-to-date 2023

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox