How Inflation Affects UK Gilts
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Higher inflation typically lifts gilt yields and hurts conventional gilt prices. Linkers behave differently.
Guidens fulde briefing er på engelsk. Titel, resumé og navigation er på dit sprog, så du kan beslutte, om du vil læse videre.
How Inflation Affects UK Gilts — the mechanics
Inflation erodes the real value of fixed coupons. Markets therefore demand a higher nominal yield, which means a lower price today. Index-linked gilts transfer much of that inflation path to the issuer.
Unexpected inflation hurts conventional gilts two ways: the Bank may hike, raising yields (prices down), and the real value of the fixed coupon falls. Expected inflation is already inside the nominal yield.
Breakevens — nominal yield minus real (linker) yield — are the market’s inflation package, not a forecast you should treat as destiny.
If your liability is CPI-linked (a UK pension in payment), a conventional gilt is an imperfect hedge. That is the linker’s job, with RPI/CPI basis risk attached.
Official sources (UK Gilts)
Primary statistics and prospectuses for UK Gilts are published by the issuer, not by this newsroom. The labelled links at the end of this page go to those official sites (DMO, TreasuryDirect, Finanzagentur, MEF, AFT, SNB or ECB as relevant).
Our live board is a teaching overlay: dated prints, named sources, estimated ISIN lines. It is not a replacement for the issuer’s calendar.
Vigtige pointer
- Unexpected inflation hurts conventional gilts two ways: the Bank may hike, raising yields (prices down), and the real value of the fixed coupon falls.
- Prices and yields change. When this site quotes them, it dates them on the live board.
- Credit of a G7 government in its own currency is not the same as a stable screen price, and not the same as a bank deposit.
FAQ
- Are linkers always better when inflation is high?
- Only if inflation outruns what was already priced. If you buy after inflation fears peak, real yields may already be high.