Gilts

Gilts

Gilts are investments provided by the Government when they want to borrow money.  They are termed "Gilt Edged" British Government Securities.  You effectively lend the Government some money for a return.  If you buy a gilt you will receive a fixed rate of interest for the rest of its life and then the original capital back at the loan repayment date (maturity).

Gilts are classed as one of the safest types of investment as they are backed by the Government. If you buy a gilt you cannot cash it in but you can sell it on the Stock Market. Prices for buying and selling gilts change on a daily basis but there are generally lots of dealers wanting to buy and sell.  Remember that you may get more or less than what you paid, depending on demand for the gilt that you own.

Gilt prices change because people buying them change their views about interest rates. For example if a gilt paid a fixed rate of interest of 10% and general interest rates were 5%, this would seem a high return and people would be prepared to pay more for the purchase of the gilt. Conversely, if general interest rates were 15% demand would be low for the gilt because it paid lower interest than could be received on a bank account. Overseas Governments also borrow money in the same way, these are normally termed as 'Overseas Bonds'.

For more advice on Gilts contact us.