What is a gilt?
A gilt is a bond issued by the UK government to borrow money. Investors lend the government a sum, receive regular interest payments, and get their money back on a set date. Gilts are the main way the UK funds its deficit. The name comes from 'gilt-edged', meaning very safe.
The UK Debt Management Office, part of the Treasury family, sells gilts at auctions. Buyers include pension funds, insurers, banks and overseas investors. A gilt has a face value, a fixed interest payment called the coupon, and a maturity date. Some last a few years, others 50 years or more. Index-linked gilts pay more when RPI inflation rises, which makes them costly when inflation is high. After they are sold, gilts are traded on the market, so their prices change daily. Most UK pension funds hold large amounts of gilts, so their value affects many people's retirement savings. The interest the government pays on gilts is a big part of its debt interest bill. When investors demand higher returns to hold gilts, the government's borrowing costs rise. Gilt prices act as a running verdict on the public finances.
The left tends to see gilt markets as a constraint the government should manage, not something that should dictate public spending.
The right tends to see the gilt market as an important check on spending, warning that loss of market confidence can be costly.
Britain is split. Now you decide.
Borrow heavily in WeDecide and the gilt market can turn on you, pushing up what you pay to borrow.
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Are gilts safe?
The UK government has never failed to pay on a gilt, so they are seen as very low risk. Their price can still rise and fall before maturity.
Can I buy gilts myself?
Yes. Individuals can buy gilts through investment platforms or brokers.