ILB - iShares Government Inflation ETF

[System]

On February 4th, 2014, iShares UBS Government Inflation Index Fund changed its name to iShares UBS Government Inflation ETF.

http://au.ishares.com/fund/fund-overview-ILB-ASX.do

 

[System]

On October 1st, 2014, iShares UBS Government Inflation ETF changed its name to iShares Government Inflation ETF.

 

[Dona Ferentes]

noticed a mention of ILBs by qldfrog. I hold a range of ILBs directly through FIIG, not a fund of govt issues. I quite like the long dated nature of the Bonds, but recognise the convexity. Meantime, coupons have landed in the cash account, with inflation coupon rising quarterly and capital return reducing the risk, over time.

 

[qldfrog]

I have a large ..for me exposure to ilb..the code..as this was part of my move to safety early last month.good timing there but was surprised by the fall yesterday..i suppose when people need cash they sell anything they have still worth something after the rout

 

[Dona Ferentes]

US debt markets seized up on Friday after Trump did something. Response was for OS funds to sell and repatriate dollars. Anything long dated gets hit harder (bond convexity)

Local bond markets reported heavy selling pressure, an evaporation of liquidity and upward pressure on yields in global government borrowing markets, including the US and Australia.

The yields rose due to sudden selling by offshore investors such as hedge funds which are scrambling to repatriate cash to their home markets and amid concerns the institutional investors may not be able to roll over their own borrowing.

 

[qldfrog]

I was really wondering.thanks for the link.
When everything is going right and left, it is hard to stay ahead information wise

 

[Dona Ferentes]

getting creamed. The QE that's coming isn't a headwind for Bonds; its a tornado

 

[InsvestoBoy]

getting creamed. The QE that's coming isn't a headwind for Bonds; its a tornado

View attachment 101471

ummm, this massive drop you show is not due to market expectations of QE, for that look at IGB. ILB is inflation linked bonds, that drop is from crashing inflation expectations...

 

[qldfrog]

ummm, this massive drop you show is not due to market expectations of QE, for that look at IGB. ILB is inflation linked bonds, that drop is from crashing inflation expectations...

usually these bonds are inflations +xx percent return;
In an inflation environment you win, but if inflation collapses and is let's say 0 or 1pc, the xx component becomes massive even 2pc is a superstar ..:
in any case much higher than the bank rate
so my understanding was that they would not jump up but stay constant...obviously I was wrong...but maybe the market is not really right either on these?
What do people use to store cash in kind of capital garantee way: once my money is with a chess, it is kind of protected from the bank collapse or cash seizure by gov so not really keen on leaving it in an account

 

[InsvestoBoy]

usually these bonds are inflations +xx percent return;
In an inflation environment you win, but if inflation collapses and is let's say 0 or 1pc, the xx component becomes massive even 2pc is a superstar ..:
in any case much higher than the bank rate
so my understanding was that they would not jump up but stay constant...obviously I was wrong...but maybe the market is not really right either on these?
What do people use to store cash in kind of capital garantee way: once my money is with a chess, it is kind of protected from the bank collapse or cash seizure by gov so not really keen on leaving it in an account

The ETF is a rolling maturity product.

If you want guaranteed payout hold the underlying bonds which are ASX traded. When they mature you will get your money back, in nominal terms.

 

[qldfrog]

The ETF is a rolling maturity product.

If you want guaranteed payout hold the underlying bonds which are ASX traded. When they mature you will get your money back, in nominal terms.

I do this with a couple but was trying to diversify in term of rate/maturity so the EFT.
Thanks for the info, at least I was right there...

 

[InsvestoBoy]

What maturity do you want? There's ASX listed bonds out till 2047 and inflation linked bonds out till 2050!

https://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNMENT_BOND

 

[qldfrog]

What maturity do you want? There's ASX listed bonds out till 2047 and inflation linked bonds out till 2050!

https://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNMENT_BOND

I try to stack different maturity dates using the asx listed GSBxx
That way i can guarantee at least coupon value once a year plus regular interest payments
I already had 25 27 but want to add missing years till 27 then roll over if when finances allow

 

[qldfrog]

I thought ilb was doing that...but now feel more confident handling this myself

 

[InsvestoBoy]

I thought ilb was doing that...but now feel more confident handling this myself

It’s doing half of it, the rolling half, but the goal of the roll is to maintain a constant maturity, not provide you a total return.

 

[InsvestoBoy]

Imagine it's early 2020 and you have full knowledge of 3 years into the future.

You know about COVID, you know about money "printing", you know about supply chain shocks and inflation.

You even know the exact date that market stress will abate in March 2020, allowing you to enter at the exact bottom of deflationary shock to perfectly time the inflationary shock.

Surely you'd expect to do a bit better than this out of the only product on the ASX with "inflation" in the name.