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Definition of

index-linked gilt

Stockholding & Investments

UK bond with payments linked to retail prices in the United Kingdom, an inflation-proof government bond, first introduced for institutional investors in 1981 and then made available to the general public in 1982. It is inflation-proof in two ways: the dividend is raised every six months in line with the retail price index and the original capital is repaid in real terms at redemption, when the indexing of the repayment is undertaken. The nominal value of the stock, however, does not increase with inflation. Like other gilts, ILGs are traded on the market. Price changes are principally dependent on investors' changing perceptions of inflation and real yields.

Related definitions of "index-linked gilt"

index-linked gilt - Related Articles
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    In addition to index-linked bonds, typical LDI strategies also use nominal bonds (such as UK gilts) or interest rate swaps. It is true that the yields which are effectively being locked into today by entering into these instruments are low by long-term historic standards. However, by the standards
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  • Longevity, Reserves, and Annuities—A Difficult Circle to Square

    Best Practice

    We have seen some interesting developments recently, with annuity providers cutting the return on index-linked annuities from around 6% to 4%, a cut of 33%. This is an enormous amount for potential pensioners to lose from their pension, and one needs to understand why insurers have made this move.
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Definitions of ’index-linked gilt’ and meaning of ’index-linked gilt’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’index-linked gilt’ and other financial terms with our online QFINANCE Financial Dictionary.

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