Gilt-Edged Bond

DEFINITION of 'Gilt-Edged Bond'

A bond issued by the U.K. government at a fixed interest rate and maturity. "Gilt-edged bond" may also be used to refer to a quality fixed income investment issue from a blue chip company or highly credit-worthy government or agency. The term is essentially meant to convey the impression that these high-quality bonds have little risk of default. May also be referred to simply as "gilts."

BREAKING DOWN 'Gilt-Edged Bond'

A gilt-edged bond will generally have one of the top rating categories assigned by credit rating services such as Standard & Poor's or Moody's. Because of their quality and low degree of risk, gilt-edged bonds offer yields that are well below the yields offered by more speculative bonds. Despite their lower yields, gilt-edged bonds often form the cornerstone of investment portfolios for conservative investors whose top priority is capital preservation.