Gilt Yield Calculator United Kingdom

What the gilt yield calculator does

The calculator turns the basic details of a UK government bond into the two yields investors compare: the current yield and an approximate yield to maturity. Enter the gilt’s face value, coupon rate, today’s price and the years until redemption. The tool returns the income you earn now and the annual return you can expect if you hold to maturity.

Gilts fund government spending and are a mainstay of cautious portfolios and pension funds. A gilt’s price moves in the market while its coupon is fixed, so the yield you get depends on the price you pay. The calculator shows that relationship, so you can see whether a gilt trading below or above face value offers a better return.

Coupon, price and face value

The face value, or par, is what the government repays on the maturity date, almost always £100 per unit. The coupon rate is the fixed annual interest on that face value, so a 4% coupon pays £4 a year per £100 whatever the gilt costs. The market price is what you pay today, which can be above or below par.

When market interest rates rise above a gilt’s coupon, its price falls below par so that new buyers get a competitive return; when rates fall, the price rises above par. That is why the same coupon gives a different yield depending on the price you paid.

Current yield explained

The current yield divides the annual coupon by the price you pay, as a percentage. A £4 coupon on a gilt bought for £95 gives a current yield of about 4.21%, a little above the coupon rate because you paid less than face value for the same payment.

It is useful when income is what matters to you, but it ignores what happens at maturity: the gain you make if you bought below par, or the loss if you bought above it. Yield to maturity covers that.

Yield to maturity

Yield to maturity, or YTM, is the total annual return from holding a gilt until redemption, combining the coupons with the movement of the price towards par. Buy below face value and YTM is higher than the current yield because you also collect a gain at redemption; buy above par and it is lower because you take a small loss.

The tool uses a standard approximation: the annual coupon plus the yearly share of the gain or loss to par, divided by the average of the price and face value. It is close to the exact figure for most gilts. For a gilt bought at £95 with a £4 coupon and five years to run, the approximate YTM is about 5.13%.

What you need to enter

• The face value of the gilt, normally £100.
• The coupon rate as a percentage of face value.
• The market price you would pay today.
• The whole number of years until it matures.

Use the clean price, the quoted price before accrued interest is added, so the yields match how gilts are normally quoted. The coupon and maturity year are in the gilt’s name, for example “Treasury 4% 2030”, while the price changes during the trading day.

Reading your result

The calculator returns the annual coupon (the cash each unit pays), the current yield (that income against your purchase price) and the approximate yield to maturity. Use yield to maturity to compare gilts with different prices and maturities, because it captures both the income and the pull towards par.

These are gross yields, before tax on the coupon. They assume you hold to maturity and that the government pays as promised, which for UK gilts is treated as very safe. If you sell early, your return depends on the price at the time, which can be above or below par.

When to use this tool

Use it when comparing gilts whose prices differ from face value, to see the extra return on a gilt trading at a discount, or to check a yield your platform quotes. Run it again as prices move, since a gilt’s yield changes every time its price does.

A note on interest rate risk

A gilt’s price falls when market rates rise, so a long-dated gilt can lose value quickly if rates climb after you buy, even though its coupon is safe. The longer the time to maturity, the more sensitive the price is to rate changes, so two gilts with the same yield can carry very different risk if you might need to sell early. Holding to maturity avoids this, because you are repaid at face value whatever happens in between, which is why long-term holders watch yield to maturity most closely.

This is general information only and not financial advice.

About This Gilt Yield Calculator

Use this gilt yield calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.