Gilt
Gilts are bonds that have a very low risk of default and a correspondingly low rate of return. They are called gilts because the original certificates issued by the British government had gilded edges. Government bonds in the United Kingdom, India, and several other Commonwealth countries are known as gilts. Gilts are the equivalent of U.S. Treasury securities in their respective countries.
- Gilts are government bonds, so they are particularly sensitive to interest rate changes.
- They also provide diversification benefits because of their low or negative correlation with stock markets.
- Gilts often respond strongly to political events, such as Brexit.
- Gilts may be conventional gilts issued in nominal terms or index-linked gilts, which are indexed to inflation.
- Low-risk corporate bonds and stocks may also be called gilts or gilt-edged securities.