The instrument
A gilt is a loan to the British government. The fixed-income market, of which gilts are the UK government's part, is much larger than the market in company shares. The contract itself is small enough to draw.
Conventional gilt
Index-linked gilt
Amounts in issue are nominal, from the gilt list dated 20 May 2026. The ticker is the form used on dealing screens. It is not a stock-exchange code.
On a conventional gilt the coupon and the final repayment are fixed numbers of pounds. You know, on the day you buy, how many pounds will arrive, and when. You do not know what those pounds will buy, and you do not know the price if you sell before the end.
On a linker the coupon rate is fixed, but it is a real rate. Both the interest and the principal are scaled up with the Retail Prices Index, with a lag. The promise is purchasing power, not a fixed number of pounds. A large share of the stock is of this kind, which is why the government's interest bill can jump when inflation jumps even if conventional yields have not moved. The bill is on the questions page.
The coupon is written on the bond. The yield is not. The yield is the market's rate of interest on the price you pay today for the payments still to come. Price and yield are one fact, read from opposite ends. Pay more for the same coupons, and the yield is lower. If yields in the market rise, an old gilt, stuck with its smaller coupon, is worth less.
There is more than one yield. They answer different questions.
Drag the yield. The price is what you would pay, on a coupon date, for £100 back at maturity, plus the coupon twice a year. This is a yield to maturity. When the yield rises, the price falls.
Other borrowing in pounds is priced off this market. The UK borrows in its own currency. Buyers are not mainly worried that the Treasury will fail to pay the cash. They worry about inflation, and about the price if they have to sell. A company pays more than the government to borrow for the same length of time. How gilts compare with America and with the safest euro-area governments is the premium.
A fixed-rate mortgage is priced from the point on the curve that matches the fix, not from the ten-year gilt and not from Bank Rate alone. A five-year fixed mortgage is based on the five-year point. A two-year fix is based on the two-year point. The lender hedges those years in the swap and gilt market, then adds a margin for credit, costs and profit. A variable mortgage does follow Bank Rate. A five-year fix can move on a day when Bank Rate does not, because the five-year yield moved.
The first sale of a gilt, and every sale after it, are the market. The rate the government actually pays is set at auction.