Gilt-edged securities, often referred to as gilts, are debt securities issued by the government, typically considered low-risk investments. The term “gilt” is derived from the gilded edges that were once a distinctive feature of the bond certificates issued by the UK government.

Key characteristics of gilt-edged securities include:

1. **Issuer:** Gilt-edged securities are issued by sovereign governments. In the United Kingdom, for instance, they are issued by the UK government.

2. **Low Risk:** These securities are generally considered low-risk investments because they are backed by the creditworthiness of the issuing government. Governments have the ability to raise funds through taxation and, in most cases, can print money to meet their debt obligations.

3. **Fixed Interest Payments:** Gilt-edged securities pay a fixed rate of interest, known as the coupon rate, to bondholders at regular intervals. The interest payments provide a predictable income stream for investors.

4. **Maturity Period:** Gilt-edged securities often have long maturity periods, ranging from a few years to several decades. Investors who purchase these securities are essentially lending money to the government for the specified period.

5. **Tradability:** Gilt-edged securities are actively traded on financial markets, and their prices can fluctuate based on changes in interest rates and market conditions. Investors can buy and sell these securities in the secondary market.

6. **Government Bond Markets:** Gilt-edged securities are a significant component of government bond markets. They are commonly used as benchmark securities against which other fixed-income securities are priced.

7. **Risk Perception:** While considered low-risk, gilt-edged securities are not entirely risk-free. There is still a risk associated with changes in interest rates, inflation, and economic conditions. Moreover, the market value of these securities can fluctuate.

8. **Uses in Portfolios:** Investors, particularly those seeking stability and income, often include gilt-edged securities in their investment portfolios. These securities can serve as a relatively safe haven during times of market uncertainty.

9. **Diversification:** Gilt-edged securities can be used by investors as a means of diversifying their portfolios, providing a counterbalance to riskier assets.

10. **Government Debt Management:** Gilt issuance is a crucial aspect of government debt management. Governments issue gilts to raise funds for various purposes, including financing budget deficits and funding public projects.

The terminology may vary in different countries; for example, in the United States, similar low-risk government securities are known as Treasury securities, including Treasury bonds and Treasury bills. The appeal of gilt-edged securities lies in their perceived safety and reliability, making them attractive to conservative investors and institutional portfolios.