From: john boyle 
Newsgroups: uk.finance
Subject: Re: BS Fixed interest rate accounts
Date: Wed, 27 Aug 2003 21:28:23 +0100

In message , Rob Graham 
 writes
>The interest rate (called the coupon) paid by HMG on a gilt is whatever
>percentage that was originally stated of the basic price of the gilt, i.e.
>£100 (par). However, if the coupon is, say 10%, then the gilts trade at a
>figure that is much higher than par because basic interest rates are much
>lower than that and people are willing to pay over the odds to get a good
>rate, but the interest they are getting on their investment is obviously
>much lower. Also, if they've paid over the odds, they have to remember that
>they'll only get back par if they hold the gilt to maturity.
>

Yes, but the 'rate paid for their money' by HMG is actually the actual 
amount divided by the auction/placing price. So in your example, if the 
gilt is issued by auction and the average auction price is 90.9 pence 
then the Govt are paying 11% for their money.
-- 
john boyle