Gilt-edged securities

Gilt-edged securities are bonds issued by some national governments. The term is of British origin, and then referred to the debt securities issued by the Bank of England, whose paper certificates had a gilt (or gilded) edge. Hence, they are known as gilt-edged securities, or gilts for short. Today the term is used in the United Kingdom as well as some Commonwealth nations, such as South Africa and India. However, when reference is made to "gilts", what is generally meant is UK gilts, unless otherwise specified.

Colloquially, the term "gilt-edged" is sometimes used to denote high-grade securities, consequently carrying low yields, as opposed to relatively riskier, below investment-grade securities.

In 2002 the data collected by the British Office for National Statistics revealed that about two-thirds of all UK gilts are held by insurance companies and pension funds. Since 2009 large quantities of gilts have been created and repurchased by the Bank of England under its policy of quantitative easing, and in recent years overseas investors have also been attracted to gilts by their "safe haven" status.

Government of the United Kingdom

Her Majesty's Government (HMG; Welsh: Llywodraeth Ei Mawrhydi), commonly referred to as the British government, is the central government of the United Kingdom of Great Britain and Northern Ireland.

The government is led by the prime minister, who selects all the remaining ministers. The prime minister and the other most senior ministers belong to the supreme decision-making committee, known as the Cabinet. The government ministers usually all sit in Parliament, and are accountable to it. The government is dependent on Parliament to make primary legislation, and since the Fixed-terms Parliaments Act 2011, general elections are held every five years to elect a new House of Commons, unless there is a successful vote of no confidence in the government in the House of Commons, in which case an election may be held in short order. After an election, the monarch (currently Queen Elizabeth II) selects as prime minister the leader of the party most likely to command a majority of MPs in the House of Commons.

First Cameron ministry

David Cameron formed the First Cameron ministry after being invited by Queen Elizabeth II to begin a new government following the resignation of the previous Prime Minister of the United Kingdom of Great Britain and Northern Ireland, Gordon Brown, on 11 May 2010. It was a coalition government, composed of members of both the Conservative Party and the Liberal Democrats.

The government's Cabinet was made up of sixteen Conservatives and five Liberal Democrats with eight other Conservatives and one other Liberal Democrat attending cabinet but not members. The Cameron ministry was the first coalition government to have governed the United Kingdom since the Churchill war ministry of the Second World War. Following the 2015 British general election, the ministry was replaced by the single-party Second Cameron ministry.

History

The previous Parliament had been dissolved on 12 April 2010 in advance of the general election on 6 May. The election resulted in a hung parliament, no single party having an overall majority in the House of Commons, the Conservatives having the most seats but 20 short of a majority.

Government bond

A government bond is a bond issued by a national government, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date. Government bonds are usually denominated in the country's own currency. Another term similar to government bond is "sovereign bond". Technically any bond issued by a sovereign entity is a sovereign bond but sometimes the term is used to refer to bonds issued in a currency other than the sovereign's currency. If a government or sovereign is close to default on its debt the media often refer to this as a sovereign debt crisis.

The terms on which a government can sell bonds depend on how creditworthy the market considers it to be. International credit rating agencies will provide ratings for the bonds, but market participants will make up their own minds about this.

History

The first general government bonds were issued in the Netherlands in 1517. Because the Netherlands did not exist at that time, the bonds issued by the city of Amsterdam are considered their predecessor which later merged into Netherlands government bonds. The average interest rate at that time fluctuated around 20%.