An Explanation of Treasury Gilts

Treasury gilts are government bonds that are issued by the United Kingdom. Similar to U.S. Treasury securities, gilts can be a short to long-term loan to the government. The future redemption of the bond, and semi-annual interest rate payments, are both guaranteed by the UK government.

Call Date

A five year redemption period, or “call date,” is considered a short-term bond. Over five to fifteen years would be a medium-term, and a long term would be any redemption period over fifteen years. Undated and double-dated call periods have also been issued.

Another option available for UK bond investors are “indexed-linked” gilts. First set at the prevailing market rate, the indexed-linked bonds semi-annual coupon payment and principal payment are adjusted by the Retail Price Index (RPI).

Risk of the Bond

Since gilts are backed by the full faith and credit of the government, they are considered a safe investment on the primary market. Once they are purchased from the primary market, the bond can be traded on the secondary market “at par,” “under par,” or “over par” value. Par value being the face value of the bond, or amount you would receive when the bond is redeemed at the end of its term.

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