Gilt-edged securities, also referred to asgilts, arebonds issued by the UK Government. They are sterling-denominated, tradeable debt instruments that are generally regarded as carrying very low credit risk and form the core of the United Kingdom’s marketable central government debt.[1] The term is ofBritish origin, and referred to thedebt securities issued by theBank of England on behalf ofHis Majesty's Treasury, whose paper certificates had a gilt (orgilded) edge.[2]
In 2002, the data collected by the BritishOffice for National Statistics revealed that at that time about two-thirds of all UK gilts were held by insurance companies andpension funds.[3] Since 2009, large quantities of gilts have been created and repurchased by the Bank of England under its policy ofquantitative easing.[4] Having been traditionally regarded as a "safe haven" asset class,[5] overseas investors held around 31 percent of gilts in issue by the second quarter of 2024.[6]
On 2 September 2025, the UK Debt Management Office sold a record £14 billion of the 4.75% October 2035 gilt with the highest yield since 2008.[7] The syndicated offering of the new 10-year gilt was oversubscribed with more than £141 billion of orders.[8][9]
Modern gilt-edged securities fall into several main types. Conventional gilts pay a fixed cash coupon every six months and repay their nominal principal at a specified maturity date.[10] Index-linked gilts have coupons and principal that are adjusted in line with a measure of inflation, historically theRetail Prices Index.[11] Green gilts are conventional gilts whose proceeds are allocated, under a published government framework, to eligible environmental and climate-related expenditures.[1][12] A small number of legacy undated and double-dated gilts remained in circulation into the early twenty-first century before being redeemed, and some gilts are eligible to be separated into their individual cash flows and traded asgilt strips.[13]
In his 2019 book about the gilt market from 1928 to 1972, William A. Allen described gilt-edged securities as "long‐duration liabilities of the UK government" that were traded on theLondon Stock Exchange[14][15]: 1517
Today, the term "gilt-edged security" or simply "gilt" is used in theUnited Kingdom as well as someCommonwealth nations, such asSouth Africa andIndia.[16][17] However, when reference is made to "gilts", what is generally meant is UK gilts, unless otherwise specified. Colloquially, the term "gilt-edged" is sometimes used to denote high-grade securities, consequently carrying low yields, as opposed to relatively riskier, below investment-grade securities.[14][15]
Gilt-edgedmarket makers (GEMMs) arebanks or securities houses registered with the Bank of England which have certain obligations, such as taking part in gilt auctions.[18]
The term "gilt account" is also used by theReserve Bank of India to refer to a constituent account maintained by acustodian bank for maintenance and servicing ofdematerialized government securities owned by a retail customer.[19]
Following the 1688Glorious Revolution, with the founding in 1694 of theBank of England by Royal Charter,King William III borrowed £1,200,000 from the bank's 1,268 private subscribers to bank stock in order to fund thewar with France.[20][21] This marked the inception of what became a permanent or perpetual national public debt, with the Stock Exchange dealing in UK government securities.[14]: 10 The Bank of England's debt securities were issued as certificates with gilded edges.[22][2]
The next major public debt incurred by the government was theSouth Sea Bubble of 1720, which took on a substantial portion of the national debt in exchange for trading privileges.[23] The South Sea Bubble of 1720 and its aftermath led to a restructuring of government obligations and to a clearer separation between government debt and private joint-stock companies.[24] Over the eighteenth and early nineteenth centuries, successive governments consolidated a variety of annuities and other instruments into fewer, larger issues that could be more easily traded.[23][25]
One important outcome of this process was the emergence ofconsols, perpetual bonds that paid a fixed coupon with no fixed redemption date.[26] Consols came to represent a large share of outstanding government debt and were widely held by domestic and overseas investors throughout the nineteenth century. Their perceived security and liquidity helped to underpin London’s role as a leading international financial centre.[2][25]
In 1927, the chancellor of the Exchequer,Winston Churchill issued 4%consols or securities, in part to refinanceWorld War INational War Bonds.[23][27] In 2014, when they were to be repaid, these consols were valued at £218 million.[28]
The government sells bonds in order to raise the money it needs, like an IOU to be paid back at a future date—mainly from five to thirty years in the future—with interest.[29] This form of government borrowing proved successful and became a common way to fund wars and later infrastructure projects whentax revenue was not sufficient to cover their costs.[2][25] Many of the early issues wereperpetual, having no fixed maturity date. These were issued under various names but were later generally referred to asconsols.[30]
Over time, the UK government moved away from undated securities towards dated bonds with specific maturities, which are now generally referred to as gilts.[31][32] The modern gilt market developed from the mid-twentieth century onwards, with more systematic issuance programmes and, from the late 1990s, the establishment of theDebt Management Office to manage the central government’s debt sales and associated risk on behalf ofHM Treasury.[2][25]
Conventional gilts are the simplest form of UKgovernment bond and make up the largest share of the gilt portfolio (75% as of October 2016[update]).[33] A conventional gilt is a bond issued by the UK government which pays the holder a fixed cash payment (orcoupon) every six months until maturity, at which point the holder receives their final coupon payment and the return of the principal.[10]
Conventional gilts are denoted by their coupon rate and maturity year, e.g.4+1⁄4% Treasury Gilt 2055. The coupon is expressed as an annual percentage of the gilt’s nominal value, which is typically £100.[34][35] Payments are made in two equal instalments each year, so the holder of £1,000 nominal of a4+1⁄4% gilt would normally receive £45 in coupon income per year, split into two payments of £22.50, until the bond matures and the principal is repaid.[1][33]
In the secondary market, conventional gilts may trade at a premium or discount to their nominal value. When market interest rates fall below the coupon rate, the price of an existing gilt tends to rise abovepar. When market rates rise above the coupon, the price tends to fall below par. The yield to maturity incorporates both the coupon income and any capital gain or loss on redemption.[25]
The relationship between gilt prices and interest rates is an inverse one.[36] When gilt prices fall, the yield will be higher. Conversely, when gilt prices rise, the yield will fall.[37] The inverse relationship is non-linear, often represented by anoutwardly bowed curve,[38][39] and the inverse effect is not proportional.[40] Due to the coupon rate remaining constant for conventional gilts, the price has to adapt in the secondary market in order to reflect the prevailing market conditions and to remain competitive in relation to new debt.[41] Undated gilts are particularly sensitive to fluctuations in interest rates.[40]
Historically, gilt names referred to their purpose of issuance, or signified how a stock had been created, such as10+1⁄4% Conversion Stock 1999; or different names were used for different gilts simply to minimise confusion between them. In more recent times, gilts have been generally named Treasury Stocks. Since 2005–2006, all new issues of gilts have been called Treasury Gilts.[1]
The most noticeable trends in the gilt market in recent years have been:
Conventional gilts have at times been described as safe-haven assets, with investors increasing their demand for them during periods of financial stress or uncertainty in other markets.[46]
Index-linked gilts account for around a quarter of UK government debt within the gilt market.[6] The UK was one of the first developed economies to issue index-linked bonds on 27 March 1981.[47] Initially only tax-exempt pension funds were allowed to hold these bonds.[48][44] By January 2003, the UK Debt Management Office had issued 11 gilts of this type[42][49] and the issuance increased to around 60 index-linked bonds by mid-2019.[46] At the time of 26 August 2025 the DMOGilts in Issue report individually lists 35 index-linked gilts.[50]
Index-linked gilts pay coupons which are set, at the time of issue, in line with market interest rates, then the principal payment along with the semi-annual coupons are adjusted in line with movements in theGeneral Index of Retail Prices (RPI) over time.[47][51] The price of an index-linked gilt reflects expectations of future inflation as well as real interest rates, credit risk and liquidity in the gilt market.[49][48]
Ultra-long index-linked bonds, maturing in 2062[52] and 2068, were issued in October 2011 and June 2013[43] respectively, (the latter reissued September 2013),[53] and a 2065 maturity was issued in February 2016.[45] In November 2021, the DMO issued a 50-year index-linked gilt with a maturity date of 2073.[54][55]
As with all index-linked bonds, there are time lags between the collection of prices data, the publication of the inflation index and the indexation of the bond.[56] From their introduction in 1981, index-linked gilts had an eight-month indexation lag (between the month of collection of prices data and the month of indexation of the bond).[57] This was so that the amount of the next coupon was known at the start of each six-month interest accrual period. However, in 2005 theUK Debt Management Office announced that all new issues of index-linked gilts would use a three-month indexation lag, first used in the Canadian Real Return Bond market, and the vast majority of index-linked gilts now in issue are structured on that basis.[58]
In the past, the UK government issued many double-dated gilts, which had a range of maturity dates at the option of the government.[1] The last remaining such stock was redeemed in December 2013.[59]
Green gilts are UK government bonds whose proceeds are earmarked for expenditure on environmental and climate-related projects under the government’s Green Financing Framework.[60] They are structurally conventional gilts, with fixed coupons paid semi-annually and principal repaid at maturity. The money raised by the bonds are earmarked for environmental spending, such as on projects including flood defences, renewable energy, or carbon capture and storage.[12][61][62]
In September 2021, the UK held its inauguralgreen gilt sale, which was met with record demand with investors placing over £100 billion in bids.[12] The following month, a second green gilt with a duration of 32 years raised £6 billion.[63][61] The UK'sDebt Management Office (DMO) issued over £16.1 billion of green gilts during the 2021-2022 financial year.[64][65][66] The 12-year bond, issued in 2021, will mature in July 2033, and was priced with an initial issuance yield of approximately 0.872 percent.[67]
Until late 2014, there existed eight undated gilts, which by then made up a very small proportion of the UK government's debt.[68] They had no fixed maturity date. These gilts were very old: some, such asconsols, dated from the 18th century. The largest,War Loan, was issued in the early 20th century.[1][69] The redemption (payout of the principal) of these bonds was at the discretion of the UK government, but because of their age, they all had low coupons, and so for a long time there was little incentive for the government to redeem them. Because the outstanding amounts were relatively very small, there was a very limited market in most of these gilts.[1]
In 2014 the government announced that 4% Consolidated Loan and 3½% War Loan, along with other undated issues, would be redeemed in early 2015 as part of a strategy to retire very long-standing debt.[69] During 2015 the remaining undated gilts, including 2½% Consolidated Stock, were repaid, with 2½% Consolidated Stock being redeemed on 5 July 2015 following the exercise of an embedded call option.[23][70] As a result, no undated gilts remain in issue.[32][71]
Many gilts can be "stripped" into their individual cash flows, namely interest (the periodic coupon payments) and principal (the ultimate repayment of the investment) which can be traded separately aszero-coupon gilts, or gilt strips.[41] This allows investors to obtain specific cash-flow profiles and helps in constructing term structures of interest rates.[13][72] For example, a ten-year gilt can be stripped to make 21 separate securities: 20 strips based on the coupons, which are entitled to just one of the half-yearly interest payments; and one strip entitled to the redemption payment at the end of the ten years. The title "Separately Traded and Registered Interest and Principal Securities" was created as areverse acronym for "strips".[41]
The UK gilt strip market was introduced in December 1997.[13] Under the strip facility, only certain gilts designated as "strippable" are eligible to be stripped into, and reconstituted from, their component cash flows. Stripping and reconstitution take place within the CREST settlement system, and participation is largely confined to institutions such as gilt-edged market makers (GEMMs) and other professional investors.[13][73]
By the early 2000s, a substantial volume of gilts had been stripped, amounting to more than £100 billion of nominal stock and representing a significant share of eligible issues.[72] The strips market continues to provide a specialised segment of the gilt market, used by investors who require precise timing of cash flows or who are active in managing interest rate risk along the yield curve.[13][73]
The maturity of gilts is defined by theUK Debt Management Office (DMO) as follows: short, 0–7 years; medium, 7–15 years; and long, more than 15 years. This classification is used in the DMO's financing remit and in official statistics on the composition of the gilt portfolio.[1][33]
For some time new conventional gilts were referred to as "Treasury Stocks", but since 2005-06 all new gilts have been named "Treasury Gilts". Some older gilts are referred to as "Conversion Stock" or "Exchequer Stock".
{{cite web}}: CS1 maint: url-status (link)Moreover, in its quantitative easing operations between 2009 and 2012, the Bank of England bought £375 billion of gilts, in exchange for its own deposit liabilities. As a result of these and other operations, bankers' deposits in the Bank of England amount to £297 billion
While investors pour over the various data points hints as to the outlook for the UK and global economy, and grapple with tariffs and turbulence in equity markets, one of the traditional safe haven asset classes – UK gilts – has performed strongly.
As of the second quarter of 2024, around 31%, or £635 billion, of gilts were held overseas ... Index-linked gilts make up around one quarter of all gilts.
The UK raised a record £14 billion ($18.7 billion) from a sale of 10-year gilts, with higher yields helping to draw more than £141 billion of orders.
UK government bonds are called gilts. Like US Treasury bonds, conventional gilts pay semi-annual coupons and redeem at par at maturity.
Index-linked gilts are dated gilts which are designed to guard against erosion caused by inflation. They are tied to inflation through the Retail Price Index.
£10 billion was raised from the sale of the Gilt this morning: the largest inaugural green issuance by any sovereign, with the largest ever order book for a sovereign green transaction.
The gilt strips market is a recent development, with trading having commenced only on 8 December 1997. Not all gilts are strippable; only stocks designated as being strippable by the BoE (and subsequently the DMO) may be stripped.
Public sector fixed-interest securities are known as "gilt-edged" securities (or "gilts") when they refer to government stock, ...
Government bonds in the U.K., India, and several other Commonwealth countries are known as gilts.
Gilt - a UK Government bond so called because traditionally the bond certificate had gilt edges, hence: gilt-edged now a generic term assigned to an investment with extremely low risk and high security.
The toll of the South Sea Bubble prompted a reckoning of the root causes of the crash and calls for restructuring the national debt.
Perpetual annuities in the form of today's undated gilt-edge securities were not issued until after the Bubble.
The war debt that the Treasury is retiring' (or calling') on 1 February 2015 is £218m of undated perpetual bonds paying 4% a year, known as the 4% Consolidated Loan (or Consols').
It announced on Friday it would pay off £218m from a 4% consolidated loan on 1 February 2015, as part of a redemption of bonds stretching as far back as the 18th century.
These undated gilts were referred to as consols and promised to pay a stated coupon rate each year for ever ... Indeed, although some of these perpetuities had been in issue for more than one hundred years, all of them were fully redeemed by 2015, following a decision by the Chancellor of the Exchequer.
The last undated gilt, also referred to as a perpetuity because it had no redemption date, was called in by the British government on July 5, 2015. Three hundred years of financial history has come to an end.
A bond will be issued at a par value, normally £100 and pay a fixed interest for a fixed period.
Over the lifetime of the loan, the investor receives interest payments, known as the coupon. This is expressed as a percentage of the gilt's face value.
There is an inverse relationship between interest rates and the price of gilts.
Equally, as interest rates rise, investors all other things being equal will find this fixed income stream less attractive and as a consequence the market price of that bond will fall.
Thus, the inverse relationship between bond prices and yields is non-linear.
The slight curvature in Exhibits 3 and 4 results from the nonlinear relationship between price and yield.
Gilt prices vary because interest rates vary. A relatively high sensitivity to interest rate movements is observed amongst undated gilts ...There is always an inverse relationship between interest rates and gilt prices but rarely a proportionally inverse one. Usually the change in gilt price is less than proportionate to the interest rate change.
Some conventional gilts, following issuance by the government and trading on the secondary market, can be stripped. A gilt STRIPS (the letters stand for Separate Trading of Registered Interest and Principal Securities) occurs when the gilt is separated from its coupons and the gilt and its coupons all become zero coupon bonds.
Calculated from the prices of index-linked gilts, which were first issued following the 1981 budget ... There are 11 index-linked stocks in issue (4 in 1982), with a total nominal value of approximately £60 billion compared to a conventional market of £241 billion (at end-January 2003).
In June 2013, supported by strong demand, the UK DMO extended the gilt curve modestly by launching a 55-year gilt (maturing in July 2068) via syndication. The DMO raised £4.8 billion of 2068 gilts from the transaction.
Inflation-indexed government bonds (index-linked gilts) were first introduced in the UK in March 1981 … Initially only pension funds could invest in them, because pension funds had (partially) index-linked pensions to deliver to their pensioners.
The UK has sold a 50-year gilt at a record-low yield ... the 0 1/8 per cent Index-linked Treasury Gilt 2065 are linked to the retail price index measure of inflation.
There are now around 60 index-linked bonds by mid-2019, with a total value of approximately £400 billion, which represents a quarter of total government debt.
Following the government's intent in the 10 March 1981 Budget, the UK Treasury issued its first index-linked gilt on 27 March 1981 with an auction of £1 billion 2% Index-Linked Treasury 1996.
The first modern inflation-linked bonds, or 'linkers', were issued by the UK in 1981 ... The gilt's ownership was initially restricted to pension funds and institutions writing pension business.
There are currently eleven index-linked gilts in issue, with the longest dated bond maturing in 2035.
Index-linked gilts are still bonds issued by the government to pay for spending but their structure of payouts is very different to a conventional bond. With linkers the semi-annual coupon payments and the principal (the final payout) are adjusted in line with a measure of inflation called General Index of Retail Prices (also known as the RPI).
Issue date: 21 October 2011; First coupon date: 22 March 2012; Coupon: 3/8% Index-linked Treasury Gilt 2062; Ex-dividend date: 20 October 2011; Maturity date: 22 March 2062.
Britain sold 1.1 billion pounds ($1.47 billion) of a new index-linked gilt maturing in 2073 on Tuesday, which will pay investors a record-low inflation-adjusted yield for a bond sold via a syndication.
Sir Robert Stheeman, the Chief Executive of the DMO, said: "The new index-linked gilt has a 2073 maturity date and represents the first extension to our real yield curve since the launch of the 2068 index-linked gilt in September 2013."
...indexation lag (the fact that there exists a lag between the publication of the inflation index and the indexation of the bond)...
The structure of inflation-linked bonds in Britain is quite different than that of the United States, Canada, or Sweden. The U.K. issues incorporate an 8-month lag, significantly longer than that of the U.S. issues.
Index-linked gilts first issued from April 2005 employ the three-month lag indexation technique first used in the Canadian Real Return Bond (RRB) market, rather than the eight-month lag methodology previously used.
Green bonds fall under the category of fixed income instruments whose proceeds will be used to finance climate or environment friendly projects.
In September 2021, the UK raised £10 billion from the sale of its first 'Green Gilt' (sovereign green bond), followed by a second £6 billion issue one month later with a 32-year maturity, making it the sovereign green bond with the longest maturity in the world.
Notwithstanding the overall reduction in gilt sales, the planned green gilt issuance proceeded with a slightly larger cash value of £16.1 billion across two syndicated offerings in September and October.
£16.1 billion of this total was raised from the issuance of two green gilts, via the UK Debt Management Office (DMO), ...
First issued in September 2021, total proceeds raised from green gilt issuance in 2021–22 and 2022–23 were £16.1 billion and £9.9 billion respectively. This is across two green gilts – 0⅞% Green Gilt 2033 and 1½% Green Gilt 2053.
The new 2033 gilt will pay a coupon of 0.875% and has been priced to give a yield of 0.8721%, 7.5 basis points more than the conventional June 2032 gilt, at the tight end of initial guidance.
In 2014, the government undertook to repay the last eight outstanding undated gilts, some of the oldest UK government borrowing in existence. Repayment was achieved by 5 July 2015...
The 2½% Consolidated Stock used in the formula was redeemed by the Government on 5 July 2015, following the exercise of the embedded call option.
The history of ultra-long bonds goes back to the 18th Century when the United Kingdom borrowed through issuance of "undated" gilts. More than two centuries later, the last undated bonds in the United Kingdom gilt portfolio were completely redeemed, in 2015.
By the end of December 1999 the number of strippable bonds was 11, totalling £116bn and representing over one-third of the total amount of gilts outstanding.
GEMMs, as well as the DMO and the Bank of England, are the only institutions permitted to strip and reconstitute gilts. Strips may only be held or transferred within CREST.
