Gilt-edged securities

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:

  • Some conventional gilts are designated as green gilts: their proceeds are allocated, under a published government framework, to eligible environmental and climate-related expenditures.

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.: 1517 

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.: 10  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 date—mainly from five to thirty years in the future—with 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% as of October 2016). 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.[needs update]

Coupon rate

Conventional gilts are denoted by their coupon rate and maturity year, e.g. 4+1⁄2% 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 4+1⁄2% 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

Bidirectional inverse relationship between market yield shifts and secondary market gilt prices.

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 10+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.

The most noticeable trends in the gilt market in recent years have been:

Index-linked gilts

Index-linked gilts account for around a quarter of UK government debt within the gilt market. The UK was one of the first developed economies to issue index-linked bonds on 27 March 1981. Initially only tax-exempt pension funds were allowed to hold these bonds. By January 2003, the UK Debt Management Office had issued 11 gilts of this type and according to an analysis in The Economic History Review, the cumulative issuance had increased to around 60 index-linked bonds by mid-2019. As at 26 August 2025 the DMO Gilts in Issue report individually lists 35 index-linked gilts.

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 the General Index of Retail Prices (RPI) over time. 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.

Ultra-long index-linked bonds, maturing in 2062 and 2068, were issued in October 2011 and June 2013 respectively, (the latter reissued September 2013), and a 2065 maturity was issued in February 2016. In November 2021, the DMO issued a 50-year index-linked gilt with a maturity date of 2073.

Indexation lag

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. 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). 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 the UK 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.

Double-dated gilts

In the past, the UK government issued many double-dated gilts, which had a range of maturity dates at the option of the government. The last remaining such stock was redeemed in December 2013.

Green gilts

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. 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.

In September 2021, the UK held its inaugural green gilt sale, which was met with record demand with investors placing over £100 billion in bids. The following month, a second green gilt with a duration of 32 years raised £6 billion. The UK's Debt Management Office (DMO) issued over £16.1 billion of green gilts during the 2021-2022 financial year. 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.

On 10 March 2026, the UK's Debt Management Office successfully launched the £6.25 billion (nominal) 4+5⁄8% Green Gilt 2037 which saw record demand with a total order book of over £80 billion (nominal). The allocation was primarily domestic, with UK-based investors accounting for approximately two-thirds of the final issuance. This marked the UK's third green gilt since the programme's inception in 2021, and was the first to be issued under the government's updated 2025 Green Financing Framework, which has the effect of expanding the eligible expenditures to include nuclear energy projects. This issuance was also notable for being the first green gilt to be made available to retail investors at the initial launch through the Winterflood Retail Access Platform (WRAP).

Undated gilts

Historical undated gilts

Until late 2014, there existed eight undated gilts, which by then made up a very small proportion of the UK government's debt. They had no fixed maturity date. These gilts were very old: some, such as consols, dated from the 18th century. The largest, War Loan, was issued in the early 20th century. 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.

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. 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. As a result, no undated gilts remain in issue.

Gilt strips

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 as zero-coupon gilts, or gilt strips. This allows investors to obtain specific cash-flow profiles and helps in constructing term structures of interest rates. 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 a reverse acronym for "strips".

The UK gilt strip market was introduced in December 1997. 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.

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. 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.

Maturity of gilts

The maturity of gilts is classified by the UK 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. Upon reaching its final maturity date, a gilt held within an investor's portfolio triggers an automated, par-value cash redemption, where the central government credits the principal capital sum directly back to the holder's cash balance via their investment platform.

While this foundational, trifurcated classification serves as the structural baseline for the UK Debt Management Office's (DMO) financing remit, the practical reality of the gilt-edged marketplace spans a far more expansive chronological layout. At the absolute near-cash floor, the sovereign debt matrix is supported by ultra-short instruments, including highly liquid Treasury bills with maturities ranging from one to six months, which act as critical tactical cash management channels for the state. This baseline tier is seamlessly augmented by conventional shorts (0–7 years) and mediums (7–15 years), which represent the absolute core of marketable UK central government liabilities and carry the highest concentration of trading volume across secondary market matching engines.

Conversely, the expansion of the long-dated category has seen the strategic introduction of ultra-long conventional and index-linked gilts with maturities progressively extending out to 30, 50, and 55 years. These highly specialised, long-duration instruments are systematically engineered to serve as structural asset-liability matching tools for large institutional pension funds and insurance consortia. Because these funds carry contractual, multi-decade cash-flow obligations to beneficiaries, they aggressively absorb ultra-long maturities to permanently firewall their portfolios from short-term interest rate volatility and reinvestment friction.

Historically, the maturity spectrum also featured a distinct category of undated or perpetual gilts—most famously exemplified by War Loans and Consols—which carried no legally binding redemption dates and paid fixed coupons indefinitely at the sovereign's discretion. This historical spectrum shifted permanently in 2015 when HM Treasury exercised its call options to fully redeem all outstanding perpetual debt. Although the financial scale of these remaining obligations was negligible relative to the modern macroeconomy—representing a minute, legacy administrative cleanup of fragmented family estates—the redemption left the active market consisting solely of bonds with fixed maturity dates. Consequently, managing contemporary issuance spectrums requires the DMO to carefully balance short-term funding costs against the changing maturity preferences of global institutional desks to insulate the state from refinancing risk.

See also

References

  1. 1 2 3 4 5 6 7 8 "UK Government Securities: a Guide to Gilts" (PDF). londonstockexchange.com (Eighth ed.). Debt Management Office. June 2010. Retrieved 25 August 2025. 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)
  2. 1 2 3 4 5 "A Brief History Of British Gilt Edged Securities". Gilts360.com. 1 January 2013. Retrieved 12 October 2022.
  3. 1 2 OECD public debt markets: trend and recent structural changes. Organisation for Economic Co-operation and Development. 11 June 2002. ISBN 92-64-19761-3.
  4. 1 2 Allen, W. (3 August 2014). "17". Monetary Policy and Financial Repression in Britain, 1951 - 59. Springer. ISBN 978-1-137-38382-2. LCCN 2014024394. 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
  5. 1 2 Thorpe, David (7 April 2025). "Is now a good time to own gilts?". www.ftadviser.com. Retrieved 3 September 2025. 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.
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  10. 1 2 Chisholm, Andrew M. (29 June 2009). An Introduction to International Capital Markets: Products, Strategies, Participants. John Wiley & Sons. p. 79. ISBN 978-0-470-75898-4. LCCN 2009013327. UK government bonds are called gilts. Like US Treasury bonds, conventional gilts pay semi-annual coupons and redeem at par at maturity.
  11. 1 2 3 "UK's first Green Gilt raises £10 billion for green projects". GOV.UK. 21 September 2021. Retrieved 27 August 2025. £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.
  12. ↑ Bruce, Ian (2009). Understand Bonds and Gilts in a Day. Global Professional Publishing. p. 26. ISBN 978-1-906403-10-2. LCCN 2010292292. 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.
  13. 1 2 3 4 5 Choudhry, Moorad; Cross, Graham "Harry"; Harrison, Jim (1 May 2003). Gilt-Edged Market. Elsevier. p. 107. ISBN 978-0-08-047286-7. 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.
  14. 1 2 3 Allen, William A.; Allen, Bill (3 January 2019). The Bank of England and the Government Debt: Operations in the Gilt-Edged Market, 1928–1972. Cambridge University Press. pp. xiv+260. ISBN 978-1-108-49983-5.
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  27. ↑ Dale, Richard (2004). The First Crash: Lessons from the South Sea Bubble. Princeton University Press. p. 24. ISBN 978-0-691-11971-7. LCCN 2004044319. Perpetual annuities in the form of today's undated gilt-edge securities were not issued until after the Bubble.
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  32. ↑ "Repayment of £2.6 billion historical debt to be completed by government". GOV.UK. 27 March 2015. Retrieved 5 December 2025.
  33. 1 2 Taylor, Bryan (February 2016). "The Perpetuities that are No Longer Perpetual – Finaeon". Retrieved 1 December 2025. 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.
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  37. ↑ Evans, Anthony J. (27 October 2014). Markets for Managers: A Managerial Economics Primer. John Wiley & Sons. p. 103. ISBN 978-1-118-86796-9. LCCN 2014022437. There is an inverse relationship between interest rates and the price of gilts.
  38. ↑ Stevenson, David (26 September 2012). The Financial Times Guide to Investing for Income: Grow Your Income Through Smarter Investing. Pearson UK. p. (unpaginated). ISBN 978-0-273-77638-3. LCCN 2011009437. 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.
  39. ↑ Johnson, R. Stafford (9 February 2009). Bond Evaluation, Selection, and Management. John Wiley & Sons. p. 24. ISBN 978-1-4051-4235-9. LCCN 2003015468. Thus, the inverse relationship between bond prices and yields is non-linear.
  40. ↑ Fabozzi, Frank J.; Pollack, Irving M. (1983). The Handbook of Fixed Income Securities. Dow Jones-Irwin. p. 599. ISBN 978-0-87094-306-5. LCCN 82071874. The slight curvature in Exhibits 3 and 4 results from the nonlinear relationship between price and yield.
  41. 1 2 Redhead, Keith (15 September 2008). Personal Finance and Investments: A Behavioural Finance Perspective. Routledge. p. (unpaginated). ISBN 978-1-134-08837-9. 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.
  42. 1 2 3 Arnold, Glen (15 July 2015). The Financial Times Guide to Bond and Money Markets. Pearson UK. p. 56. ISBN 978-0-273-79180-5. 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.
  43. ↑ Jones, Charles P. (1993). Investments: Analysis and Management (4th ed.). John Wiley & Sons. pp. 507–508. ISBN 978-0471591146.
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  46. ↑ Bank of England (22 March 2024). Monetary policy consequences of financial stability interventions (PDF) (Report). p. 1. Yields on index-linked gilts and on the longest-dated nominal gilts began to spiral upwards, with every rise in yields triggering further asset sales by LDIs into an increasingly illiquid market.
  47. ↑ Stubbington, Tommy; Cumbo, Josephine; Flood, Chris (28 September 2022). "How Kwasi Kwarteng's mini-Budget broke the UK bond market". The Financial Times. Retrieved 19 April 2026. "The moves in long-end yields were nothing short of incredible; the gilt market was in freefall," said Daniela Russell, head of UK rates strategy at HSBC.
  48. ↑ Kuhn, Robert Lawrence (1990). Investing and Risk Management. Dow-Jones Irwin. p. 377. ISBN 978-1-55623-248-0. Since duration measures the average time required before receiving expected future income, and since more time increases hazard and likelihood of surprises, long duration (intuitively) is more risky than short duration.
  49. ↑ "Yield-Based Bond Duration Measures and Properties". CFA Institute. Retrieved 14 June 2026. Duration, for a given bond, is not static and decreases as the bond approaches maturity.
  50. 1 2 3 4 Staff, Investopedia. "Understanding Pull to Par: Bond Price Movements Explained". Investopedia. Retrieved 10 June 2026. As the bond approaches maturity, its value decreases steadily until it converges toward the par value on the maturity date. This pull-down or pull-up in the value of a bond is referred to as the amortization or accretion towards par.
  51. ↑ Beau, Denis (21 January 2016). "Fixed income market liquidity" (PDF). bis.org. Bank for International Settlements. CGFS Papers No 55. Retrieved 14 June 2026. Fixed income markets are in a state of transition... diverging trends in the supply of and the demand for liquidity services are reflected in possibly increasingly fragile liquidity conditions... the report underscores the need for a close monitoring of liquidity conditions as well as an ongoing assessment of how new liquidity providers and trading platforms are affecting the distribution of risks among market participants.
  52. ↑ Beker, Victor A. (20 April 2021). Preventing the Next Financial Crisis. Routledge Frontiers of Political Economy. Taylor & Francis. p. 43. ISBN 978-1-000-37525-1. LCCN 2020048695.
  53. 1 2 3 4 Fabozzi, Frank J. (2021). Bond Markets, Analysis, and Strategies (10th ed.). MIT Press. p. 73. ISBN 9780262046275. At the maturity date, the bond's value is equal to its par or maturity value. So, as a bond's maturity approaches, the price of a discount bond will rise to its par value and a premium bond will fall to its par value a characteristic sometimes referred to as "pull to par value."
  54. 1 2 Tuckman, Bruce (2002). Fixed Income Securities: Tools for Today's Markets (2nd ed.). John Wiley & Sons. p. 43. ISBN 9780471356158. As these bonds mature... the value of above-market coupons falls... Hence, the prices of these premium bonds fall over time until they are worth par at maturity. This effect of time on bond prices is known as the pull to par.
  55. 1 2 Oliver, Michael J.; Rutterford, Janette (14 May 2020). "'The capital market is dead': the difficult birth of index-linked gilts in the UK". The Economic History Review. 73 (1): 258–280. doi:10.1111/ehr.12875. ISSN 1468-0289. 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.
  56. 1 2 "Further details about yields data". www.bankofengland.co.uk. 3 July 2025. Retrieved 27 August 2025. 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).
  57. 1 2 OECD (20 May 2014). OECD Sovereign Borrowing Outlook 2014. OECD Publishing. p. 80. ISBN 978-92-64-20755-4. 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.
  58. 1 2 Blake, David (2003). Pension Schemes and Pension Funds in the United Kingdom. Oxford University Press. p. 417. ISBN 978-0-19-924353-2. 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.
  59. 1 2 Suter, Laura (27 July 2016). "UK Govt Sells 50-Year Bond at Record Low". Fundweb. ProQuest 1807167449. Retrieved 25 August 2025. 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.
  60. ↑ DMO Annual Review 2024-25 (PDF) (Report). UK Debt Management Office. 29 August 2025. Retrieved 17 April 2026. ...an increase of £6.0 billion in sales of medium conventional gilts (via a £10.9 billion increase in syndications and a £4.9 billion reduction in auctions...
  61. 1 2 "Syndicated Launch of £15.0 Billion of 4⅞% Treasury Gilt 2036: Result" (PDF). dmo.gov.uk. 14 April 2026. Retrieved 15 April 2026. The £15 billion 10-year gilt launched today represents the largest single transaction ever executed for the UK government.
  62. ↑ Benjamin-Cook, Hannah (14 April 2026). "UK Pays Highest Yield for 10-Year Gilt Sale Since 2008". Bloomberg News. Retrieved 15 April 2026. The notes will hand investors a yield of 4.9158%, the UK Debt Management Office said. That's the highest for any 10-year gilt sale since 2008,...
  63. ↑ Price, Chris (6 March 2026). "Borrowing costs rise at fastest pace since Truss mini-Budget". Yahoo Finance. Retrieved 10 September 2026. Overnight, the 10-year yield hit its highest level since November 2023 .... The yield on two-year UK gilts has surged by more than 40 basis points this week, in the biggest jump since August 2024.
  64. ↑ Macdonald, Anna (4 September 2026). "The case for gilts – what rising yields mean for investors". Hargreaves Lansdown. Retrieved 9 September 2026.
  65. ↑ Smith, Ian (8 September 2026). "UK pays highest borrowing cost since 1998 at gilt sale". The Financial Times. p. 8. Retrieved 9 September 2026. A £4bn sale of 30-year debt yesterday was priced at a yield of 5.82 per cent, the UK Debt Management Office said, the highest interest rate on any gilt issuance since the DMO's creation in 1998.
  66. ↑ "UK 30-year gilt yields top 6% for the first time since 1998". Reuters. 1 October 2026. Retrieved 6 October 2026. Thirty-year gilt yields rose as high as 6.029%, their highest since January 1998, and up 6 basis points on the day, according to LSEG data.
  67. 1 2 Fabozzi, Frank J.; Choudhry, Moorad (20 January 2004). The Handbook of European Fixed Income Securities. John Wiley & Sons. p. 249. ISBN 978-0-471-64951-9. 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.
  68. 1 2 "UK Index-linked Gilts: Inflation-linked Bonds Explained". IG. Retrieved 25 August 2025. 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.
  69. 1 2 Choudhry, Moorad (1 May 2003). Gilt-Edged Market. Elsevier. p. 92. ISBN 978-0-08-047286-7. There are currently eleven index-linked gilts in issue, with the longest dated bond maturing in 2035.
  70. ↑ "Index-linked Gilts in Issue". www.dmo.gov.uk. Retrieved 27 August 2025.
  71. ↑ Stevenson, David; Tuckwell, David (25 February 2019). The ETFs Handbook. Harriman House Limited. p. 149. ISBN 978-0-85719-726-9. 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).
  72. ↑ "T62 03/8% IL Treasury Gilt 62". www.londonstockexchange.com. Retrieved 25 August 2025. 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.
  73. ↑ "Launch by Syndicated Offering of 0⅛% Index-Linked Treasury Gilt 2068" (PDF). dmo.gov.uk. United Kingdom Debt Management Office. 17 September 2013. Retrieved 25 August 2025.
  74. ↑ Milliken, David (23 November 2021). "UK sells new 50-year inflation-linked bond with record-low yield". Reuters. Retrieved 25 August 2025. 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.
  75. ↑ "Syndicated Launch of £1.1 billion of 0⅛% Index-Linked Treasury Gilt 2073: Result" (PDF). dmo.gov.uk. 23 November 2021. Retrieved 25 August 2025. 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."
  76. ↑ Hördahl, Peter; Tristani, Oreste (2007). Inflation Risk Premia in the Term Structure of Interest Rates. Bank for International Settlements, Monetary and Economic Department. p. 7. ...indexation lag (the fact that there exists a lag between the publication of the inflation index and the indexation of the bond)...
  77. ↑ Brynjolfsson, John; Fabozzi, Frank J. (15 February 1999). Handbook of Inflation Indexed Bonds. John Wiley & Sons. p. 242. ISBN 978-1-883249-48-9. 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.
  78. ↑ "Formulae for Calculating Gilt Prices from Yields" (PDF). londonstockexchange.com (3rd ed.). Debt Management Office. 16 March 2005. p. 32. Retrieved 5 December 2025. 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.
  79. ↑ "Redemption of 12% Exchequer Stock 2013-2017 on 12 December 2013" (PDF). UK Debt Management Office. Retrieved 16 June 2016.
  80. ↑ Tirumala, Raghu Dharmapuri; Tiwari, Piyush (18 March 2023). Advances in Infrastructure Finance. Springer Nature. p. 85. ISBN 978-981-99-0440-2. Green bonds fall under the category of fixed income instruments whose proceeds will be used to finance climate or environment friendly projects.
  81. 1 2 "Green Gilts". United Kingdom Debt Management Office. UK Debt Management Office. Retrieved 28 November 2025.
  82. ↑ Stubbington, Tommy (21 September 2021). "UK's debut 'green gilt' sale draws blockbuster demand". Financial Times. Retrieved 21 September 2021.
  83. ↑ Thompson, Simon (3 March 2023). Green and Sustainable Finance: Principles and Practice in Banking, Investment and Insurance. Kogan Page Publishers. p. 339. ISBN 978-1-3986-0925-9. LCCN 2022951122. 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.
  84. ↑ "DMO Annual Review 2021-22" (PDF). dmo.gov.uk. The United Kingdom Debt Management Office. 4 August 2022. p. 3. Retrieved 31 August 2025. 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.
  85. ↑ "UK Green Financing Allocation Report" (PDF). gov.uk. HM Treasury. September 2022. p. 5. £16.1 billion of this total was raised from the issuance of two green gilts, via the UK Debt Management Office (DMO), ...
  86. ↑ "Debt Management Report 2024–25" (PDF). GOV.UK. HM Treasury. 2 March 2024. Retrieved 28 November 2025. 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.
  87. ↑ Milliken, David; Bahceli, Yoruk (21 September 2021). "UK's first green gilt draws record $137 billion demand". Reuters. Retrieved 31 August 2025. 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.
  88. 1 2 "Syndicated Launch of £6.25 Billion (Nominal) of 4⅝% Green Gilt 2037: Result" (PDF) (Press release). DMO. 10 March 2026. Retrieved 11 March 2026.
  89. ↑ Bruce, Andy. Schomberg, William (ed.). "UK sells green gilt amid tumult in government bond markets | Financial News". www.lse.co.uk. Reuters. Retrieved 11 March 2026 – via London Stock Exchange.
  90. ↑ Lester, Ahren (9 March 2026). "UK readies third sovereign green bond amid £12bn issuance update". Environmental Finance. Retrieved 11 March 2026.
  91. ↑ Ritchie, Greg (10 March 2026). "A £2 Billion Fund Shuns New UK Green Bonds Funding Nuclear". Bloomberg News. Retrieved 11 March 2026. The UK government's decision to include nuclear energy in the program is "disappointing," Jones said in an interview.
  92. ↑ Sebastian, Alex (10 March 2026). "Hargreaves Lansdown expands green gilt access to retail investors". Investment Week. Retrieved 12 March 2026. In partnership with Winterflood... Hargreaves Lansdown has expanded its primary markets service to offer green gilts to retail investors at launch for the first time.
  93. ↑ Pagdin, Ian; Hardy, Michelle (3 November 2017). Investment and Portfolio Management: A Practical Introduction. Kogan Page Publishers. p. 190. ISBN 978-0-7494-8006-6. LCCN 2017470228. 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...
  94. 1 2 "Chancellor to repay the nation's First World War debt". GOV.UK. HM Treasury. 3 December 2014. Retrieved 3 December 2014.
  95. ↑ "Rentcharges: consultation on updating the formula used to calculate redemption prices" (PDF). GOV.UK. Department for Communities and Local Government. 1 October 2015. Retrieved 28 November 2025. 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.
  96. ↑ OECD (26 May 2017). OECD Sovereign Borrowing Outlook 2017. OECD Publishing. p. 29. ISBN 978-92-64-27127-2. 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.
  97. 1 2 Deacon, Mark (August 2000). "Stripping facilities" (PDF). dmo.gov.uk. The Actuary. p. 27. Retrieved 29 August 2025. 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.
  98. 1 2 United Kingdom: Her Majesty's Treasury: Debt Management Office (DMO) (8 March 2021). "GEMM Guidebook: A guide to the roles of the DMO and Primary Dealers (GEMMs) in the UK government bond market". Documents: 7. Footnote 5 – via EliScholar. 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.
  99. ↑ "When your gilt matures: your options". Hargreaves Lansdown. Retrieved 15 June 2026. When a bond you own matures, the lump sum that had previously been invested in the bond is then returned as cash into your investment portfolio.
  100. ↑ "About Gilts". UK Debt Management Office (DMO). Retrieved 15 June 2026. The price of a conventional gilt is quoted in terms of price per £100 face value. This face value, otherwise known as the nominal amount... is the amount of money (or capital repayment) the holder will receive at maturity.
  101. ↑ "About Treasury Bills". UK Debt Management Office (DMO). Retrieved 15 June 2026. Treasury bills may be issued with a minimum maturity of 1 day and a maximum maturity of 364 days. However, regular weekly tenders are typically for maturities of 1 month (approximately 28 days), 3 months (approximately 91 days) and 6 months (approximately 182 days).
  102. ↑ Essex, Martin; Pitchford, Ruth (1996). The Reuters Guide to World Bond Markets. Wiley. p. 141. ISBN 978-0471960461. LCCN gb96059191. Retrieved 15 June 2026. For 1995–6, the authorities aimed to make about 15 per cent of issuance index-linked, splitting the rest evenly between conventional shorts, mediums and longs.
  103. ↑ UK Debt Management Office (DMO) (5 December 2012). Super-long and perpetual gilts: Response to consultation (PDF) (Report). HM Treasury / UK Debt Management Office. p. 3, 6. Retrieved 15 June 2026. The Government has taken the following decisions: to remove the current maturity cap on gilt issuance set at around 50 years; in 2013-14 to look to launch new issuance in the 50-60 year area, subject to demand and market conditions... to match liabilities in excess of 50 years, from a sub-set of investors looking to hedge liabilities... undertaking Liability Driven Investment (LDI) strategies.
  104. ↑ Pension Protection Fund (PPF) (2025). The Purple Book 2025: DB pensions universe risk profile (PDF) (Report). Pension Protection Fund / The Pensions Regulator. p. 21, 28. Retrieved 15 June 2026. The category 'bonds' represents those physically held as well as other investments whose economic characteristics resemble bonds, such as LDI... As scheme maturity increases, the proportion of assets invested in bonds and annuities increases... Buy-out and buy-in transactions provide schemes with the opportunity to remove risk relating to all or part of their liability.
  105. ↑ Homer, Sidney; Sylla; Richard (2005). A History of Interest Rates. John Wiley & Sons. p. 451. ISBN 978-0-471-73283-9. LCCN 2005281578. Retrieved 15 June 2026.
  106. ↑ "Report and Accounts 2014-2015" (PDF). dmo.gov.uk. UK Debt Management Office. 2015. Retrieved 13 July 2026. At Budget 2015, HM Government announced its intention to redeem the remaining four undated gilts during 2015-2016, thereby removing all the perpetual debt from the gilt portfolio.
  107. ↑ "Government to pay off WW1 debt". BBC News. 3 December 2014. Retrieved 13 July 2026. The government will repay the outstanding £1.9bn of debt from a 3.5% War Loan on 9 March 2015. More than 120,000 investors hold War Loan bonds.
  108. ↑ "Repayment of £2.6 billion historical debt to be completed by government". HM Treasury. 27 March 2015. Following the passage of the Finance Act 2015, the remaining four undated gilts - 2¾% Annuities, 2½% Annuities, 2½% Consolidated Stock and 2½% Treasury Stock – will all be redeemed in their entirety at par on 5 July 2015... The final four undated bonds to be redeemed in July 2015 can be traced back three centuries and include gilts issued in 1853...