Government Bonds - What Is A Government Bond & What Are The Different Kinds Of Government Bonds?

A government bond is in effect a loan to the government, If you buy a government bond then you are lending money to the government in exchange for interest on the bond plus full repayment at a set date in the future.Government bonds are also known as "gilts"

There are several different kinds of government bonds which include conventional gilts, double dated conventional gilts, indexed linked guilts, undated guilts and guilt strips.

Conventional guilts are the most common type of government bond and are the simplest type of guilt. They can be short term guilts (which mature in under 5 years) medium term maturing in 5 - 15 years or long term maturing in 15+ years time.

Double dated guilts are much less common and have a time range between which the government can redeem the guilts. So for example the date range for maturity might be 5 to 7 years. The government can redeem the guilts within that period by giving the guilt holder 3 months notice.

Undated guilts are quite rare and will be redeemed whenever the government so chooses to do so. They have low coupon returns on them

Index linked guilts account for 25% of the government guilts issued and unlike conventional guilts these guilts are adjusted in line with UK price inflation i.e. the retail price index.