Gilt-Edged Switching

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DEFINITION of 'Gilt-Edged Switching'

The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments. They are considered to be low-risk investments because they are backed by strong, established entities. Gilt-edged securities are generally inversely linked to interest rates, and therefore experience price fluctuations.

INVESTOPEDIA EXPLAINS 'Gilt-Edged Switching'

Gilt-edged switching is utilized by governments like those of the United Kingdom, South Africa and Ireland. An example of a Gilt-edged switching selling one bond in favor of another one. Higher-yielding bonds may increase the potential for profit. Gilt-edged switching may also involve selling one bond at a discount in order to purchase a more favorably yielding instrument.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Gilt-Edged Securities

    High-grade bonds that are issued by a government or firm. This ...
  3. Security

    A financial instrument that represents: an ownership position ...
  4. Blue Chip

    A nationally recognized, well-established and financially sound ...
  5. Gilt-Edged Bond

    A bond issued by the U.K. government at a fixed interest rate ...
  6. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
RELATED FAQS
  1. What is the difference between a gilt edged bond and a regular bond?

    A gilt edged bond is a high-grade bond issue. The term "gilt" is of British origin and originally referred to debt securities ... Read Full Answer >>
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