Gilts: Difference between revisions
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imported>Doug Williamson (Add three examples of different types of gilts.) |
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:<span style="color:#4B0082">'''''Example: Short-dated Conventional gilt'''''</span> | :<span style="color:#4B0082">'''''Example 1: Short-dated Conventional gilt'''''</span> | ||
:UK gilt is the 2% Treasury Gilt 2020 in denominations of £100. | :UK gilt is the 2% Treasury Gilt 2020 in denominations of £100. | ||
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:<span style="color:#4B0082">'''''Example: Long-dated Conventional gilt'''''</span> | :<span style="color:#4B0082">'''''Example 2: Long-dated Conventional gilt'''''</span> | ||
:A very long dated conventional gilt is the 4% Treasury Gilt 2060. | :A very long dated conventional gilt is the 4% Treasury Gilt 2060. | ||
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:<span style="color:#4B0082">'''''Example: Index-linked gilts'''''</span> | :<span style="color:#4B0082">'''''Example 3: Index-linked gilts'''''</span> | ||
:Index-linked gilts pay out larger amounts, the higher the rate of inflation. | :Index-linked gilts pay out larger amounts, the higher the rate of inflation. | ||
Revision as of 22:49, 20 May 2020
1.
Most commonly, UK central government debt.
Also known as Gilt-edged securities, or Gilt-edged stock.
- Example 1: Short-dated Conventional gilt
- UK gilt is the 2% Treasury Gilt 2020 in denominations of £100.
- Each £100 gilt repays £100 to the owner on 22 July 2020.
- It will also pay interest on 22 July 2020, calculated at 2% per year. It was originally issued in 2014.
- It pays a predetermined fixed amount of interest (2% per year) throughout its whole life.
- It will be repaid at a fixed amount of £100 at its maturity on 22 July 2020.
- Whatever happens to inflation in the meantime, these amounts will not change.
- Example 2: Long-dated Conventional gilt
- A very long dated conventional gilt is the 4% Treasury Gilt 2060.
- It will pay interest at 4% per year for the next 40 years.
- Example 3: Index-linked gilts
- Index-linked gilts pay out larger amounts, the higher the rate of inflation.
- The 'index' they are linked to is the UK Retail Prices Index (RPI).
- About 25% of gilts are index-linked, with 75% being conventional.
Historically, gilts were printed on gilt-edged paper (heavy bond paper with a metallic edge, usually gold-leaf or gold paint).The heavy expensive looking paper was designed to give a sense of confidence.
2.
The term 'gilt' is also used to refer to the debt of certain other central governments, especially US government treasury securities.
