Gilt-edged securities

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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The term used to describe, somewhat euphemistically, stocks and bonds issued by the government of the U.K. and quoted on the Stock Exchange. Theoretically, they are non-risk investments, as it is assumed that the State will never renege on its debts. In fact, the low capital risk makes the market value of such securities totally dependent on prevailing interest rates and, consequently, an investor may be forced to sell them at a price lower than that which he paid for them initially.

The securities in question may or may not be redeemable and the redeemable variety may be short-term, middle-term or long-term, depending on the monetary policy of the government at the date of issue policy of the government at the date of issue ments. High interest securities, because of the annual interest burden, are more likely to be short-term than are low interest bonds, consols, an abbreviation for Consolidated Annuities, issued by the U.K. government, are the best-known example of irredeemable securities.

Gilt-edged securities have been recently accorded some privileges to compensate for their inconsistent price, and in particular may be exempt from capital gains tax where they are resold at a profit after being held for a stated minimum period, at present one year.

Reference: The Penguin Business Dictionary, 3rd edt.