Is investing in gilts the key to a golden future – where you can even benefit from inflation? What you need to know about UK government bonds

By ROSIE MURRAY-WEST, FINANCIAL MAIL ON SUNDAY, 25 June 2023:

As storm clouds brew over the economy, it is hard at first to spy a silver lining.

Interest rates were hiked to a 15-year high of five per cent by the Bank of England on Thursday, piling further pressure on millions of mortgage holders and other borrowers. Inflation remains stubbornly high at 8.7 per cent, squeezing household budgets ever tighter.

But there is one ray of light for investors seeking out an income.

Investors who buy UK Government debt – known as gilts – are in line for a bumper income, the likes of which has not been offered since 2008…

WHAT ARE GILT-EDGED SECURITIES?

A gilt is an IOU note issued by the Treasury, promising you regular interest payments in return for lending the UK Government your money for a set period. You are also promised the return of your initial investment at the end of the lending period…

James Carthew, at investment research group QuotedData, says: ‘Banks have been slow to pass on higher interest rates to depositors, so it is not surprising that investors have been turning to the next best thing – short-term gilts.’

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