Principality 7% PIB

In the height of the financial crisis in 2008 I took two fairly sizeable punts one on Nationwide 7.25 at 73 and Principality 7% PIB buying at 53.
It's turned out v. well, although I cashed in early at 100 on the Nationwide but am still holding the Principality that are now 95 bid.

What I'm struggling with on the Principality is the whether they will call the PIB in 2020 or let it reset at the lower cpn and the impact on the price as that time approaches. The coupon resets at 3% +5 year Gilt (I believe) if it is not called. At the time of purchase the reset date was a long way off and I'd expected yields on the 5 year Gilt to have climbed since then. However, with the date coming ever closer and Gilt yields remaining low and the prospect of Principality of calling I am getting edgy.

Any knowledge/assistance on this PIB would be appreciated.

Thanks

Comments

  • We have been mulling over what to do with these for a while (held in wife's name).

    Your post has prompted some action and my wife has now sold these (96.5p with Selftrade)

    (Wonderful things these forums for prompting the more procrastination prone of us to wake up and start thinking !)

    007
  • If 5yr Gilts remain at these low levels, I would guess they won't call them and you will end up with a much reduced coupon.
  • Good price Bond007, last time I got a dealing quote from HL it was 94.5. I'd take 96.5 so a marker has been laid down to the HL dealers for tomorrow.

    My thoughts too Paddy, Given it's a small Welsh BS if the coupon is lower I'm expecting the price to drop away.

    Not worth all the risk despite the really good yield, although the 14% in 2009 was a beauty!!

    Time to sell I think.
  • My wife paid a lot more than you did, but it was a few years before !

    I noticed an hour or so ago that on the Contract Note there was no accrued interest paid and declared as such on the note- have never had that before on any PIBs/PSBs or Corporate Bonds, so maybe our "better price includes that - we are going to query this with Selftrade

    I would put money on that being the case as a quick calculation shows that accrued would be 2.43p thus putting bid at 94.07p

    Sorry I didn't spot that before

    We would still have had sold as we put limit at 94p !

  • Intresting one. i too have a few of these from 2008/9 .With the low intrest rates on offer at the moment the 7% looks okay for the next 4+ years. I think the crux comes what happens in July 2020 and the reset rate. what will the 5 year gilt be at this time . Also where do you invest any monies from a sale. This is always the decision with callable pibs. The few pibs left without a call date are pretty expensive at the moment
  • I have a smallish holding that I purchased back in May13 @ 87.6p (yield on cost = 10.74%)
    Oddly I'm planning to keep this holding until around 12 months before the coupon rate changes in June 2020, ie another 3 years. By that time the 5 year Gilt yield could be much higher. Should PIBS be completely out of fashion (ie they call them back in), then the yield to maturity is 7.27%.
    With the margin on buying/selling PIBS being relatively high, I tend to "hold" unless a very good reason comes along.
    On 1SBA (recent coupon re-set (March 2016), the price did not change a great deal until the last 3 months! (I sold August 2015)
    Note that the coupon re-sets may start to go "up", instead of "down", thus providing some form of protection against future interest rate rises.
    Be interested in your views!
  • Shaun, agree with you entirely on this. The spreads certainly on some pibs are so wide they aren't worth selling. Had to move some leeds, skipton , and newcastle pibs from a trading a/c to my isa a/c, The spreads were so wide I sold but didn't buy back at the price i was quoted. The prices on the 1sbb, and 1sba look quite good at the moment. Bought some 1sbb in the february dip at 87p yielding over 7%.
  • Colin, 1SBB is on my possibility listing
    Although PIBS (other undated securities) the spreads are fairly wide, there are opportunities around
    I suspect the main holders of PIBS, are "retired persons" who don't look at the call dates etc and are in for long-term, therefore prices do not adjust as perhaps they should do when "professional Institutional investors" get involved.
    Looking at dips in pricing is part of my strategy, together having a very wide portfolio which is monitored for "pricing changes" on a weekly basis.
    Holding undated securities is something one needs to watch, however with the ECB current buying of "corporate bonds", there is little risk for remainder of 2016.
  • Just to round off my sale details


    The contract note they produced on the Trade Date was just the basic sale at 96.5p

    They produced another contract note 2 days later on Settlement Date which showed the addition of accrued interest, so my wife did in fact get 96.5p per share plus129 days interest.


  • Colin , was it not possible to just to get a dealer to approach market maker giving them 50 pounds and doing the deal ? Brokers have done this for me on many occasions .
  • Been cautious and sold half at 96.
  • Simon didn't know about this. I have a saga share direct a/c , this is administered by Equiniti. I asked about doing a straight swap from my trading a/c to my isa a/c just paying their dealing fees but they said it couldn't be done. I had a similar problem a few years ago when Barclays were administrating Saga . I would have loved to hang onto those pibs, they were great little earners but it didn't seem to make sense paying tax on them in a trading a/c when i had spare funds in my isa
  • Equiniti are owners of Selftrade and I have done the deal across several accounts I run for family , for them to tell you it can not be done is really not on its done all the time , it simply means you have to speak to a dealer and you pay higher commission on the transaction , so with Strade it was 40 pounds each side on the contract plus effectively a spread of fifty pounds .
  • I hold these and the call date is just 3 years away now and the current price is a record high. So I'm wondering whether I should cash in now or hold and hope that they call them in rather than reset the coupon to a lower rate. Am I right in thinking that PIBS no longer count as capital requirements for banks so Principality is more likely to call them than reset them?

    A reset at today's rate would result in a coupon of around 4% so the price could fall to around 80p if we compare them to current yields on the Prefs that I hold. However, I think the Skipton 6.785% were called in April 2017 although I cannot find any news to confirm it. This had a similar reset rate to Principality 7%. So I'd like to think they will be called in 2020 and the current high price may reflect the confidence investors have that they will reset (although all bond prices seem to high at the moment)
  • Idealing do this for me regular on a trading and company account. Fee is £50 for the MM and £10 each account for idealing plus stamp if it is relavent on the holding
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