Gilt Edged Securites

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Could someone please explain Gilts to me, in plain english what are they and why would you use them, read the book and it went straight over my head, Any help greatly appreciated

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gilt Edged Securites

    Hi Sheila,
    Gilts are stocks issued by the British Government.
    They are normally fixed intrest securities, bought and sold through a broker.
    Their value will rise and fall along with the base rate.
    The value also depends on when they are redeemed and their value on the stock exchange.
    They are usually long term investements, btwn 5 and 15 years.
    They can be traded on the stock exchange and are relativly risk free compared to other forms of stock, however there may be a loss if redeemed early.
    The rate of intrest is higher than a bank deposit account.
    Gilts are a method of investing surplus funds

    I hope this helps!

    Chelle
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Gilt Edged Securites
    sheila wrote:
    Could someone please explain Gilts to me, in plain english what are they and why would you use them, read the book and it went straight over my head, Any help greatly appreciated

    Ok here's my effort, in plain english. They are a bond, but rather than issued by the government.

    Here's how a bond issue works. Someone needs money now that they want to borrow. So they get the money off someone else, then pay them interest every so offer until some time in the future they have to pay the original amount back.

    When issuing a Gilt, the government are borrowing to spend now but at a cost in interest payments.

    They are often used as a comparison for risk. I.e. they are risk free because the government is almost certain not to default on it. A risk premium in the corporate world is often considered to be that which is required above and beyond that on a gilt.

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