The previous chapter described the types of debt instrument issued by the government. This chapter deals in detail with the most important group of instruments — gilt edged stocks (gilts). We start by discussing the present institutional structure of the gilt market; this is due to change in 1986 and an outline of the new system is given. We go on to describe the methods which are used to sell gilts, emphasising how these have changed recently in order to make the government’s funding more flexible. Finally, we examine the factors behind the shape of the gilt yield curve, emphasising the importance of interest rate and inflationary expectations and the government’s funding programme.
KeywordsInterest Rate Yield Curve Real Interest Rate Money Market Market Maker
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Notes and References
- 1.Bank of England, ‘The future structure of the gilt edged market’, BEQB, June 1985, pp. 250–282.Google Scholar
- 2.A. L. Coleby, ‘The Bank’s operational procedures for meeting monetary objectives’, BEQB, June 1983, pp. 209–215.Google Scholar
- 5.Such an approach was used, for example, in R. Coghlan ‘Interpreting the money supply’, The Banker, (July 1981).Google Scholar
- 6.See the papers by C.A.E. Goodhart and D. Gowland in the Bulletin of Economic Research, 1977 and 1978.Google Scholar
- 7.The example follows closely that set out in D.K.H. Begg, The Rational Expectations Revolution in Macroeconomics, Philip Allan, 1982.Google Scholar
- 8.See H.M. Treasury, ‘H.M. Treasury Macroeconomic Model Technical Manual’, (December 1982).Google Scholar