PIB prices

PIB prices seem to be drifting steadily downward. Any ideas why and do you expect the trend to continue?


  • Simonvine, The downward drift in prices since June are not just related to PIB shares, also applies to Preference Shares and other longer & undated securities. I suspect it is due to the general tightening of money supply generally across the world financial markets, in particular the USA. Will it continue?, a question many investors and their investment managers will be asking. Long term gilt yields suggest not, possible recession in 2020? Trade wars & Brexit will not promote a rise in interest rates.
    Amateur investor view only!
    I'm not planning any disposals.
    The good investment returns of 2016 & 2017 are not showing in 2018 for my fixed income portfolio!
  • News Today
    Wall Street has extended its gains after a widely expected interest rate hike by the US Federal Reserve.

    Citing the strengthening US economy, the central bank raised rates by 0.25 percentage points to a range of 2% to 2.25%.
  • Ok, well spotted, didn't pick that up
  • The question is just how much difference a rise in short term interest rates would make to the value of very long term and perpetual holdings. I'm thinking it might be a bit less than the models suggest.

    After all, a recovery in bank deposit rates might not be permanent, and we now have an entire generation of investors scarred by miserably low short term rates. This, I think, will prop up the value of a reliable perpetual income stream as an asset for retirement planning.

    Also, the spread between PIBS/Prefs and long term gilts is still quite reasonable and (in my opinion) slightly greater than the risk premium would call for. So while the opportunities for major capital gains that existed when they were yielding close to double figures has gone, I'm still holding on to the more solid ones.

  • 30 year is too low in my book as short term brexit inflationary, longer term maybe the opposite if real free trade deals are made. But for now think the extra yield on PIBs etc will more than cover any capital loss so not sold any, famous last words. Also think higher rates would see lower returns for banks , etc from forcing redemptions so possibly see risk premium drop
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