Gilt-edged securities, also referred to as gilts, are bonds issued by the UK Government to finance the national debt and fund government expenditure (both current and capital in nature); thus they represent a debt owing from the 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. The term is of British origin, and referred to the debt securities issued by the Bank of England on behalf of His Majesty's Treasury, whose paper certificates had a gilt (or gilded) edge.
In 2002, the data collected by the British Office for National Statistics revealed that at that time about two-thirds of all UK gilts were held by insurance companies and pension funds, but the proportion has since rapidly reduced, due especially to the decline in defined benefit pension schemes. Since 2009, large quantities of gilts have been created and repurchased by the Bank of England under its policy of quantitative easing. Having been traditionally regarded as a "safe haven" asset class, overseas investors held around 31 percent of gilts in issue by the second quarter of 2024.
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. The syndicated offering of the new 10-year gilt was oversubscribed with more than £141 billion of orders.
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. Some conventional gilts are designated as green gilts: their proceeds are allocated, under a published government framework, to eligible environmental and climate-related expenditures. Index-linked gilts have coupons and principal that are adjusted in line with a measure of inflation, historically the Retail Prices Index.
Many gilts are eligible to be separated into their individual cash flows and traded as gilt strips.
A small amount of legacy undated and double-dated gilts remained into the early 21st century before being redeemed.
Nomenclature 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 A small number of legacy undated and double-dated gilts remained in circulation into the early twenty-first century before being redeemed, government" that were traded on the London Stock Exchange.
Today, the term "gilt-edged security" or simply "gilt" is used in the United Kingdom as well as some Commonwealth nations, such as South Africa and India. 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.
Gilt-edged market makers (GEMMs) are banks or securities houses registered with the Bank of England which have certain obligations, such as taking part in gilt auctions.
The term "gilt account" is also used by the Reserve Bank of India to refer to a constituent account maintained by a custodian bank for maintenance and servicing of dematerialized government securities owned by a retail customer.
History Following the 1688 Glorious Revolution, with the founding in 1694 of the Bank 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 the war with France. This marked the inception of what became a permanent or perpetual national public debt, with the Stock Exchange dealing in UK government securities. The Bank of England's debt securities were issued as certificates with gilded edges.
With the war ongoing, and the Great Recoinage of 1696 placing additional strain on the nation's finances, the Committee of Ways and Means resolved to establish a National Land Bank (as a rival to the Bank of England) to raise further capital; while the Land Bank scheme failed, a second provision in the National Land Bank Act 1696 (7 & 8 Will. 3. c. 31), empowering the Exchequer to raise up to £1,500,000 in the security of 'indented bills of credit', was a success: subsequently, Exchequer bills remained in regular use as a source of government revenue up until 1892.
The next major public debt incurred by the government was the South Sea Bubble of 1720, which took on a substantial portion of the national debt in exchange for trading privileges. 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. 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.
One important outcome of this process was the emergence of consols, perpetual bonds that paid a fixed coupon with no fixed redemption date. 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.
In 1927, the chancellor of the Exchequer, Winston Churchill issued 4% consols or securities, in part to refinance World War I National War Bonds. In 2014, when they were to be repaid, these consols were valued at £218 million.
The government sells bonds in order to raise the money it needs, like an IOU to be paid back at a future datemainly from five to thirty years in the futurewith interest. This form of government borrowing proved successful and became a common way to fund wars and later infrastructure projects when tax revenue was not sufficient to cover their costs. Many of the early issues were perpetual, having no fixed maturity date. These were issued under various names but were later generally referred to as consols.
Over time, the UK government moved away from undated securities towards dated bonds with specific maturities, which are now generally referred to as gilts. The modern gilt market developed from the mid-twentieth century onwards, with more systematic issuance programmes and, from the late 1990s, the establishment of the Debt Management Office to manage the central government’s debt sales and associated risk on behalf of HM Treasury.
Conventional gilts Conventional gilts are the simplest form of UK government bond and make up the largest share of the gilt portfolio (75% ). A conventional gilt is a bond issued by the UK government which pays the holder a fixed cash payment (or coupon) every six months until maturity, at which point the holder receives their final coupon payment and the return of the principal.
Coupon rate Conventional gilts are denoted by their coupon rate and maturity year, e.g. % Treasury Gilt 2055. The coupon is expressed as an annual percentage of the gilt’s nominal value, which is typically £100. Payments are made in two equal instalments each year, so the holder of £1,000 nominal of a % 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.
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 above par. 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.
Inverse relationship
The relationship between gilt prices and interest rates is an inverse one. When gilt prices fall, the yield will be higher. Conversely, when gilt prices rise, the yield will fall. The inverse relationship is non-linear, often represented by an outwardly bowed curve, and the inverse effect is not proportional. 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. Undated gilts are particularly sensitive to fluctuations in interest rates.
Price sensitivity and duration The degree to which a gilt's price fluctuates in response to interest rate changes is measured by its duration. This sensitivity is influenced by both maturity and the coupon rate; generally, gilts with longer maturities or lower coupon rates exhibit greater price volatility when interest rates pivot. Consequently, long-dated gilts are significantly more susceptible to price swings than short-dated ones. Such volatility was a primary driver of the price collapses seen in long-dated gilts during the market volatility of autumn 2022, exacerbated by forced selling from liability-driven investment funds.
This vulnerability highlights systemic duration risk, which represents the hazard that an investor faces when capital is locked into long-dated fixed income instruments during a rising interest rate environment. Since duration decays as bonds approach maturity, this risk acts as an asymmetric operational trap, where a sharp upward pivot in yields inflicts high-velocity capital depreciation requiring pull-to-par accretion for eventual price recovery. Consequently, managing duration risk requires a strict understanding of macro-regime shifts, as the structural sensitivity of a portfolio to rate volatility directly governs its overall insulation from forced market liquidations.
Pull-to-par effect As a conventional gilt approaches its final maturity date, its price on the secondary market naturally converges toward its nominal redemption face value, which is typically £100 per bond unit. This mathematical price path is driven purely by the temporal approach to the redemption obligation and is known as the pull-to-par effect (or reduction of maturity).
The underlying mechanism is independent of shifting macroeconomic variables or interest rate volatility, assuming a fixed yield-to-maturity framework. For a premium gilt—issued with a coupon rate that sits higher than prevailing market yields—the secondary market clean price will steadily amortise downward over time to settle at par (£100). Conversely, for a discount gilt—where the low coupon distribution falls beneath current market interest expectations—the clean price undergoes compounding capital accretion, forcing the market value upward until the discount gap is entirely erased at maturity.
As the time horizon shortens, the bond's modified duration decays toward zero, eliminating its sensitivity to changes in systemic market interest rates. Consequently, any historical price premiums or discounts generated by macroeconomic yield shifts will erode over the bond's lifespan, collapsing entirely by the mandated redemption date.
Gilt names Historically, gilt names referred to their purpose of issuance, or signified how a stock had been created, such as % 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.
Trends The most noticeable trends in the gilt market in recent years have been: Flight to quality during market stress: Conventional gilts are increasingly functioning as safe-haven assets, with investor demand intensifying during periods of acute financial instability or uncertainty in global equity markets.