what are gilt edged securities 
gilt edged securities are high grade bonds issued by certain national governments and private organizations in the past these instruments referred to the certificates issued by the bank of england boe on behalf of the majesty s treasury so named because the paper they were printed on customarily featured gilded golden edges by nature a gilt edged denotes a high quality item whose value remains fairly constant over time as an investment vehicle this equates to high grade securities with relatively low yields compared to riskier below investment grade securities for that reason gilt edge securities were once solely issued by blue chip companies and national governments with proven track records of turning profits aside from conventional gilts the british government issues index linked gilts that offer semi annual coupon payments adjusted for inflation government bonds in the u k india and several other commonwealth countries are still known as gilts understanding gilt edged securitiesgilt edged securities are high grade investment bonds offered by governments and large corporations as a method of borrowing funds the issuing institutions typically boast strong track records of consistent earnings that can cover dividend or interest payments in many ways these are the next safest bonds to u s treasury securities the united kingdom and other commonwealth nations still rely on these securities in much the same way the u s uses treasury bonds to raise revenue a conventional gilt issued by the u k government pays the holder a fixed cash payment biannually until maturity at which point the principal is returned in full the coupon payment reflects the market interest rate at the time of issuance and indicates the cash payment that the holder will receive each year similar to treasury securities the duration of gilt edged assets can range from a few years up to 50 years after the 2008 recession large quantities of gilts were created and repurchased by the bank of england in its campaign to jump start economic relief efforts 12about 20 of all u k gilts are held by pension funds 3limitations of gilt edged securitiesalthough gilt edged securities are offered by reliable government bodies and large corporations they present certain drawbacks primarily the bonds tend to fluctuate with interest rates where rate hikes will cause the price of a gilt to decline and vice versa during periods when global economic conditions are improving interest rates tend to rise in this case gilt etfs and mutual funds are likely to fall in value for this reason investors looking to generate substantial returns during periods of economic growth may source better value in index funds the greatest advantage of gilt edge securities is the fact that these instruments are typically tied to interest rates consequently they are ideal investments for retirees seeking reliable returns with minimal risk 