Gilts

What is a gilt?

UK government bonds are known as 'gilt edged securities' or 'gilts'. Bonds are fixed rate securities issued as debt and repaid at a future date.

How can I buy and sell gilts?

To deal in gilts through Lloyds TSB Share Dealing, call Customer Services on 0845 60 60 560, our business hours are Monday to Friday, from 8am to 6pm. You cannot deal in gilts via the Lloyds TSB Share Dealing website.

What is the settlement period?

Gilts bought or sold through Lloyds TSB Share Dealing will settle T+3, or three business days after the trade day.

Can I place Limit Orders for gilts?

No. Limit orders are not possible.

How do gilts pay?

Ordinary gilts are classified according to their redemption date or maturity. If held to redemption, these gilts always repay at par, or £100 nominal. That does not mean gilts can only be traded in sizes of £100, they are merely quoted in terms of the amount required to obtain £100 nominal of stock. Gilts said to be trading below par would, therefore, be priced at less than £100 nominal; above par, at more than £100 nominal.

Investors who are prepared to pay over par do so in return for the income or yield attached to the security. The rate of interest paid on a gilt is known as the coupon and is paid on the nominal amount of stock at a fixed rate.

While the coupon is fixed, the flat yield of a gilt will be affected by changes in the price of the underlying gilt. Price changes also affect the gross redemption yield (GRY), which shows the relative attractiveness of different gilts. The GRY includes all the future income payments and the capital repayment at maturity due on an individual gilt.

There are two other significant types of gilt: Undated gilts have no redemption date but pay ongoing interest. Index linked gilts are tied to the rate of inflation.

What are 'clean' and 'dirty' prices?

An important feature of gilts is the accrued interest. The interest or coupon is paid at given intervals to the holder of a gilt. However, where a gilt is purchased cum (including) dividend, the buyer receives the full payment for the period and must, therefore, compensate the seller. This is all reflected in the price. There are two methods of quoting gilt prices:

• Clean Price. This will not include accrued interest, which will be added to the bargain.
• Dirty Price. This is the total price of the gilt calculated by adding or subtracting the interest adjustment from the clean price.

When you buy a gilt through Lloyds TSB Share Dealing, we will quote an indicative clean price.

What does the 'gilt' list show?

The list shows the details relevant to investing in gilts. The columns detail the:

• clean mid price
• payment dates
• fixed interest coupon
• flat yield
• gross redemption yield (combining the flat yield and capital gain / loss if held to redemption)
• accrued interest.

In line with convention, the gilt list shows accrued interest on a T+1 basis, or 'cash settlement'. Dealing through Lloyds TSB Share Dealing will settle T+3.

Please refer to the Market View section of the Lloyds TSB Share Dealing website for our gilt list.