While only a small number of HL clients invest in government bonds (gilts), those who do are buying a record number of them.
The net buys on the HL platform, calculated as the total value of gilts bought minus the total value sold, was 63% higher in February compared to January. This is after January itself had seen the biggest amount since 2021.
Looking back further, the data for February is the highest we’ve ever seen in a single month.
And looking at net buys year to date, until close on 12 March, we’ve already reached about 60% of the total seen in 2024.
This article isn’t personal advice. Remember, investments rise and fall in value, so you could get back less than you invest. Yields are variable and aren’t a guide to future income. If you’re not sure if an investment’s right for you, ask for financial advice.
Where are gilt yields sitting right now?
The 10-year gilt yield hovered around 4.5% throughout February, while both the 2- and 5-year gilt yields were around 4.2%.
While this was lower than during the spike in yields in January, it was still high enough to encourage investors to keep buying.
The graph below shows gilt yields over the last 10 years.
What’s behind the increase in gilt trading activity?
Firstly, more HL clients are adding gilts to their portfolios.
There’s been a 32% increase in the number of our clients that hold gilts in their portfolios at the end of February 2025 compared to 12 months ago. Not only are more clients buying gilts, but the amount they’re buying has increased too. The total amount invested in gilts at the end of February 2025 was around 50% higher than it was 12 months previously.
Another big reason for the sharp increase in February is the reinvestment of the proceeds of a large gilt maturity at the end of January. This makes a lot of sense given the relatively high yields that remain available.
‘Low coupon’ gilts also have their appeal. Low coupon gilts are those with only small amount of interest payments (coupons) attached to them, meaning that most of the return comes from an increase in capital value. Given individual gilts aren’t subject to capital gains tax, this can be particularly useful for investors who’ve maxed out their ISA and capital gains allowances.
This doesn’t mean that investors shouldn’t consider buying gilts within an ISA though. Within an ISA, all returns would be tax free. For investors looking for income, it could therefore be suitable to buy a gilt with a high coupon within an ISA, as the income from the gilt would not be subject to tax.
Don’t forget that the overall return from gilts with a similar time to maturity should be similar, regardless of whether they have a high or low coupon.
Remember though, tax rules can change, and benefits depend on personal circumstances.
What could be next for gilts in 2025?
We’d naturally expect demand from retail investors to fall from the levels we’ve seen so far in 2025, particularly once we pass tax year end.
That’s because we could see early-bird investors choose to make use of their tax allowances for 2025/26 in other investments, like shares, ahead of investing in gilts.
If retail client demand falls, it could mean gilt prices drop a little, particularly in the short term. But the bigger picture is key – the gilt market has typically been dominated by institutional investors so the impact of retail client demand on prices is usually limited.
Want to invest in gilts?
If you’re looking to buy individual gilts, here are some of the gilts we have on our platform, along with their coupons, maturity dates and prices at the time of writing.
The first four columns in the table below list details of the gilts, and the last two columns highlight what proportion of returns come from a capital gain or from interest if held to the maturity date**.
For the avoidance of doubt, the final columns aren’t stating the returns that an investor would receive if they purchased the gilt.
Investing in individual gilts isn’t right for everyone. When choosing investments make sure they match your goals, attitude to risk and are held as part of a diversified portfolio. The gilts listed below are not a personal recommendation to invest. If you’re not sure if an investment’s right for you, ask for financial advice.
Gilt details
Gilt name | Coupon | £ Price* | Maturity date | Capital (% of returns if held to the maturity date**) | Interest (% of returns if held to the maturity date**) |
|---|---|---|---|---|---|
Treasury 0.125% | 0.125% | 97.11 | 30/01/2026 | 96% | 4% |
Treasury 0.375% | 0.375% | 94.54 | 22/10/2026 | 90% | 10% |
Treasury 4.125% | 4.125% | 99.90 | 29/01/2027 | 1% | 99% |
Treasury 0.125% | 0.125% | 89.90 | 31/01/2028 | 97% | 3% |
Treasury 0.25% | 0.250% | 78.10 | 31/07/2031 | 93% | 7% |
Treasury 4% | 4.000% | 97.90 | 22/10/2031 | 7% | 93% |
*Gilt prices shown are the ‘clean’ prices, exclude accrued interest and are shown per £100 of nominal bonds.
**These are estimated returns based on the prices quoted in the table above. This is for illustrative purposes and charges, tax and inflation have not been taken into account.
If you’re looking for more gilts like these, explore the gilt section of our website. There’s lots of information to help you make the best choice for your circumstances.