The term is of British origin, and then referred to the debt securities issued by the Bank of England on behalf of His Majesty's Treasury, whose paper certificates had a gilt (or gilded) edge, hence the name.
In 2002, the data collected by the British Office for National Statistics revealed that about two-thirds of all UK gilts are held by insurance companies and pension funds.
In his 2019 book about the gilt market from 1928 to 1972, William A. Allen described gilt-edged securities as "long‐duration liabilities of the UK government" that were traded on the London Stock Exchange[2][3]: 1517 Today, the term "gilt-edged security" or simply "gilt" is used in the United Kingdom as well as some Commonwealth nations, such as South Africa and India.
[6][7] This marked the inception of what became a permanent or perpetual national public debt with the Stock Exchange dealing in UK government securities.
[8] The government sells bonds in order to raise the money it needs, like an IOU to be paid back at a future date—from five to thirty years—with interest.
[9] This form of government borrowing proved successful and became a common way to fund wars and later infrastructure projects when tax revenue was not sufficient to cover their costs.
However, their semi-annual coupons and principal payment are adjusted in line with movements in the General Index of Retail Prices (RPI).
[13] In September 2021, the UK held its inaugural "green gilt" sale, which was met with record demand.
The UK's Debt Management Office (DMO) plans to sell £15bn of green gilts this year.
The money raised by the bonds are earmarked for environmental spending, such as on projects including flood defences, renewable energy, or carbon capture and storage.
[14] Until late 2014 there existed eight undated gilts, which made up a very small proportion of the UK government's debt.
The title "Separately Traded and Registered Interest and Principal Securities" was created as a reverse acronym for "strips".