Gilt-Edged Switching


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.

BREAKING DOWN '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.

  1. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  2. Security

    A financial instrument that represents an ownership position ...
  3. Bond

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

    High-grade bonds that are issued by a government or firm. This ...
  5. Blue Chip

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

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