Monday, December 27, 2010

Gilts

A gilt is common term applied to bonds issued by the UK government. Government bonds carry the same general properties as most bonds e.g. promise to repay principal as well as pre-determined interest payments. The distinction with government bonds or sovereign debt is that it is considered to carry the highest credit quality, hence the UK government bonds being referred to as gilts (in reference to them being like gold). However with all borrowers, the promise to repay is only as good as long as the borrower is willing and able to repay - and there are notable examples in history where some governments have defaulted (e.g. the third world debt crisis of the 1980's).

Synonyms: UK government bond, Sovereign, Government debt

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