Gilts as treasury investment
About this course
Conventional gilts vs index-linked, modified duration, real yields, on-the-run / off-the-run. Driven by live gilt yield history.
What you'll learn
- What gilts are
- Yields & prices
- Duration & risk
- Real yields
- Liquidity
- Treasury use cases
Part of these pathways
Related courses
- SONIA Forward Curve & OIS
- Money Market Funds (CNAV / LVNAV / VNAV)
- Short-duration bond funds & VNAVs
- Intra-LA borrowing & lending markets
- DMADF deep dive
- Term deposits, CDs & T-Bills
Common questions
What is Accrued interest?
The portion of the next coupon payment that has accumulated since the last coupon date. Added to the clean price to give the dirty (settlement) price. Standard market convention; gilt prices on screens are clean (without accrued).
What is Breakeven inflation?
The inflation rate that would make a conventional gilt and a linker of similar maturity have the same total return. Rough market estimate of expected average inflation over the bond's life, plus inflation risk premium and liquidity premium adjustments.
What is Conventional gilt?
A standard fixed-coupon UK government bond. Pays a fixed cash coupon every six months and returns par at maturity. Most of the gilt market by issuance and turnover. ISINs typically start GB00.
What is Convexity?
Second-order price sensitivity. Captures the curvature of the price-yield relationship — duration is the linear approximation; convexity corrects for the fact that price changes more for downward yield moves than upward of equal size. Important for large yield moves and long-duration bonds.
What is Coupon?
The fixed annual interest payment on a conventional gilt, expressed as a % of face value (par). E.g. "4½% Treasury Gilt 2042" pays 4.5% of par each year, in two equal six-monthly instalments.
What is Custody?
Where a gilt is actually held. LAs holding gilts directly need a custodian (usually a clearing bank or specialist) to hold them in book-entry form on the CREST system. Operationally heavier than holding bank deposits or MMFs.