MBA (General)IV – Semester, International Business Unit V
Definition of the UK Bond Market
UK government debt, called gilts, constitutes the most important sector of the sterling denominated debt market. Of the four classes of gilts issued by the Treasury, only two-conventional and index-linked – currently have any relevance.
The UK Bond Market
UK government
debt, called gilts, constitutes the most important sector of the sterling denominated debt market. Of the four classes of gilts issued by
the Treasury, only two-conventional and index-linked – currently have any relevance.
Gilt – Edged Securities
Conventional Gilts
Conventional gilts, referred to as conventional stocks in the United Kingdom,
represent 85% of the total Market. They have a fixed coupon, ranging
from 3% to 15.5% and a fixed maturity.
Index-Linked Gilts
Index-linked
stocks represent 15% of the gilt market. The redemption value of the bond is also linked
to the RPI to protect
the investor against
inflation.
The Secondary Market
London Stock
Exchange dealings are carried out by telephone by gilt-edged market makers.
