Government Bonds Flashcards
1
Q
UK Government bonds are known as
A
Gilts
2
Q
Why are government bonds issued
A
To fund Public Sector Net Cash Requirement
- Cover shortfall between expenditure and what raised in taxation
3
Q
Who are Government bonds issued by
A
auctioned by DMO
Debt Management Office
- issued by DMO to fund government borrowing
4
Q
Features of Gilts
A
- Coupon (annual percentage of NV)
- Name
- Nominal Value
- Redemption
5
Q
Gilts traded on
A
LSE
6
Q
Gilts are payed
A
Half Yearly until redemption at a fixed rate
- At Maturity bonds redeem at nominal value
7
Q
Bondholders
A
Dont have vote at AGM
8
Q
two categories of Gilts
A
- Index Linked
- Conventional bonds (Non - Index Linked )
9
Q
Index Linked Gilts
A
- Provides inflation protection
- Lower yielding compared to Conventional Bonds
- Coupons and Capital linked to RPI (Retail Price Index)
10
Q
Conventional Bonds (Non - Index Linked )
A
- Exposed to inflation risk
- Dual Dated = 2020 - 2025
- Irredeemable - Undated
- STRIP
11
Q
STRIP
A
- Separate Trading of Registered Interest and Principal
- Separates coupon payments from capital repayment
- e.g. Gilt stripped , traded separately as zero coupon
