What are gilts?
In a nutshell, they are Government debt. The Government has three ways of raising money – by imposing taxes, selling National Savings and borrowing. When it needs to borrow, it asks institutions and private investors to lend it money. In return for the loan, the government promises to pay a fixed rate of interest twice a year and to return the money in full on a set date a number of years in the future. These loans are British Government stock, also called ‘gilt-edged’ stock or gilts. When you buy gilts, you are lending money to the government. You can buy gilts when they are issued, in units of 100 each, and hold them to maturity, when you will get 100 back. But you do not have to keep them that long. You can sell them at any time through the stock market, when you will get the prevailing market price at the time, which may be more or less than 100.
