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Gilt yield definition

Updated November 22, 2016

Gilt-edged securities, or gilts, are bonds issued by the U.K. government. Similar to U.S. Treasury bonds, they are debt obligations with maturities ranging from 1 month to 30 years.

Gilt Basics

Like all bonds, gilts are a promise from the issuer to pay back a given amount of money borrowed, plus interest, at a set date in the future. The yield of a gilt is the annual return on the market price of the bond, expressed as a percentage. To calculate yield amount, the face value of the gilt is multiplied by the yield in decimal form. This amount is then paid yearly in increments until the redemption date, when the value of the gilt is returned. Fluctuating interest rates and the time-value of money may complicate the calculation.

Gilt Yield, Quoted

A gilt can come in many varieties and is quoted by type of gilt (e.g., Treasury, Exchequer or War), yield (or rate of interest) and maturity (redemption date). For example, a 10-year gilt might be quoted as "Tr 3.75% '20." A shorter term Exchequer gilt might be quoted as "Ex 12% '13-'17."

Yield Curves

A yield curve can show the relation between gilts of varying maturities and their yields. Yield curves can be normal, inverted or flat.

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About the Author

Timothea Xi has been writing business and finance articles since 2013. She has worked as an alternative investment adviser in Miami, specializing in managed futures. Xi has also worked as a stockbroker in New York City.