ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Gilt-edged securities are high-grade bonds issued by certain national governments and private organizations. It is considered as Market for safe (such as Government) securities.

Detailed explanation-2: -Gilt-edged securities refer to high-grade bonds that some national governments and private organizations issue in an effort to generate revenue. Also known as gilts, these securities were originally issued by the Bank of England.

Detailed explanation-3: -The securities issued by government organisations are government guaranteed securities and are completely safe as regards payment of interest and repayment of principal. Gilt-edged securities bear a fixed rate of interest which is generally lower than interest rate on other securities.

Detailed explanation-4: -In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

Detailed explanation-5: -A gilt-edged bond is considered the next safest to a U.S. Treasury bond. Of course, this safety comes with a price: The low risk translates to low return. Often a gilt-edged bond is offering a yield that is well below the yields offered by comparable-term but more speculative bonds because of its lower risk.