Borrowers Flashcards
How does the government borrow money?
Through long dated securities called gilts, short dated securities called treasury bills. Money is also borrowed directly from the public in the form of national savings schemes.
Public sector borrowing requirement
The difference between the government’s total revenue and its total expenditure.
Gilt-edged securities
Bonds issued by the government, so-called because of the near certainty that they will be repaid. Something is gilded or gilt-edged if there is a fine layer of gold leaf applied e.g. on the pages of a book
What are the three categories of government gilts?
Conventional, index-linked and the irredeemables.
What are conventional gilts?
Conventional gilts pay a fixed rate of interest twice a year and have repayment dates varying from five to thirty years.
What are index-linked gilts?
These pay a low rate of interest (1-4 per cent) but this interest, and the repayment value of the bonds, is linked to the retail price index.
What are irredeemable gilts?
These are a historical throwback, which are literally issues that will not be repaid. Examples include Consols and War Loan.