Gilt yields and prices move inversely because the coupon is fixed. If you buy a 4% coupon gilt at £100 and yields rise to 5%, new gilts paying 5% coupon are available — so your 4% gilt has to fall in price (to ~£95 ish, depending on remaining time to maturity) to compete. The yield-to-maturity (YTM) combines the coupon income and the capital gain/loss to maturity into a single annualised number. The yield curve shows YTMs across different maturities — currently upward-sloping (longer = higher yield, the normal "term premium" environment). Duration measures sensitivity: a 10-year duration gilt loses ~10% of its price when yields rise 1%.
Why yields and prices move opposite
The coupon is fixed in £. If market yields rise, holders of old (lower-coupon or lower-yielding) gilts are stuck with lower income than new buyers can get — so old gilts trade at a discount to bring the YTM up to market.
Worked illustration: you bought a 5-year gilt at £100 with 3% coupon. Market yields rise to 5%. New 5-year gilts are paying 5% coupon at £100. Why would anyone pay £100 for your 3% gilt? They wouldn't — your gilt has to fall to ~£91 so the buyer gets a 3% coupon + the £9 capital gain to maturity, equaling 5% YTM.
Yield-to-maturity (YTM) — the master metric
YTM is the single number that combines coupon income with capital gain/loss to maturity. Formula (intuitively):
YTM is the discount rate that makes: Price = Σ [Coupont / (1 + YTM)t] + [Nominal / (1 + YTM)n] where: Coupont = coupon paid at period t Nominal = £100 n = number of periods to maturity YTM = solved iteratively Result is approximate annualised "all-in" return if held to maturity (assumes coupon reinvested at YTM — which doesn't quite work in practice, but is a useful approximation).
In practice, you don't calculate YTM by hand. Bloomberg, broker platforms, and the DMO publish YTMs daily. Just understand that YTM combines:
- The coupon you receive over the gilt's life.
- The capital gain (if bought at a discount) or loss (if bought at a premium) to maturity.
- Roughly equivalent to an annualised total return.
The yield curve
The yield curve shows YTM for different maturities on the same axis. Three classic shapes:
- Upward-sloping (normal): longer maturities have higher YTMs. Reflects the term premium — investors demand more return for tying up money longer.
- Inverted: short-dated yields above long-dated. Often a recession signal. Common during late-cycle policy tightening.
- Flat: yields similar across maturities. Often a transition shape.
Current UK gilt yield curve (May 2026, illustrative):
| Maturity | Approx YTM |
|---|---|
| 1 year (TR25 area) | ~4.5% |
| 2 years (TG26-TM27) | ~4.4% |
| 5 years (TM30) | ~4.4% |
| 10 years (TG35) | ~4.2% |
| 20 years (TG45) | ~4.1% |
| 30 years (TS55) | ~4.0% |
| 50 years (TS75) | ~3.9% |
The curve is mildly inverted (short rates slightly above long) — a feature of the post-2022 rate-rise environment in the UK.
Duration — measuring rate sensitivity
Duration measures how much a gilt's price changes when yields move 1%. The standard measure is "modified duration":
ΔPrice% ≈ −Duration × ΔYield% So a gilt with modified duration of 8 will: - Lose ~8% in price if yields rise 1% - Gain ~8% in price if yields fall 1% Approximation breaks down for large yield moves (convexity adjustment needed) but is good enough for small moves.
Duration depends on coupon (lower coupon = higher duration) and time-to-maturity (longer = higher duration).
| Gilt | Maturity | Coupon | Approx duration |
|---|---|---|---|
| TR25 | ~1 year | 0.25% | ~1.0 |
| TG27 | ~2 years | 0.25% | ~2.0 |
| TM30 | ~5 years | 4.0% | ~4.4 |
| TG35 | ~10 years | 4.0% | ~8.0 |
| TG45 | ~20 years | 4.0% | ~13.0 |
| TS55 | ~30 years | 1.5% | ~22.0 |
| TS75 | ~50 years | 1.5% | ~28.0 |
The very long-dated, low-coupon gilts have extreme duration — these were the worst-performing gilts in 2022 when yields rose from 1% to 4%, with some losing 50-65% of their price.
Why duration matters for retirees
A retiree holding £100,000 of long-dated gilts as "safe ballast" learned in 2022 that long gilts are not safe in the short term. The TS50 (Treasury 1.5% 2050) fell from ~£100 to ~£55 — a 45% loss — when yields rose from 1.5% to 4%.
The "ballast" rationale for gilts only works when:
- You hold short-to-medium duration (1-7 years).
- You can hold to maturity (so you receive £100 back regardless of intervening price moves).
- The portfolio's overall duration is matched to your liabilities or spending timeline.
See the gilts in retirement guide for the practical retirement application.
Dirty price vs clean price
One technical wrinkle. When you buy a gilt between coupon dates, the seller has accrued some interest. The "clean price" is what's quoted; the "dirty price" includes the accrued interest you pay the seller.
- Clean price: the price you see in quotes and broker platforms. £98.50.
- Dirty price: what you actually pay. £98.50 + accrued interest.
The accrued interest gets paid back to you in the next coupon. So economically you don't lose — but it does affect how much cash you need on hand to buy.
How to look up current gilt prices and yields
- DMO website: dmo.gov.uk publishes daily gilt prices and yields.
- Broker platforms: Hargreaves Lansdown, AJ Bell, Interactive Investor publish live prices for gilts they offer.
- Bloomberg / Refinitiv (professional): real-time data and analytics.
- FT.com: daily yield data for major gilt maturities.
Sources and methodology
Gilt prices and YTMs illustrative as of May 2026 — actual figures change daily. DMO is the authoritative source. Duration mathematics follow standard fixed-income theory (Fabozzi). The methodology page documents sources.
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