Rates · R1 · 8 min
Government bonds and how they’re quoted
Know what a government bond is, read its price, and work out what a buyer actually pays.
In the news: “Treasuries fell 12/32nds” and “the 10-year gilt closed at 96.40”: the prices behind every rates headline.
The essentials
- Government bond
- A tradable loan to a government: it pays interest along the way and repays its face value, which prices treat as 100, on a set date. UK bonds are , US ones Treasuries and German ones .
- Coupon and maturity
- The coupon is the interest, a percentage of face value. Gilts and Treasuries pay it in two halves, every six months: a 4% coupon pays £2 per £100 twice a year. Maturity is the date the bond is repaid.
- Bills, bonds and linkers
- last a year or less and pay no coupon: they are sold below 100 and repaid at 100. Bonds run out to 30 years and beyond. and raise their payments with inflation.
- Clean and dirty price
- Screens show the , per 100 of face value. The buyer pays the : clean plus . A 4¼% gilt 73 days into a 181-day period carries 0.857 per 100.
- Decimals and 32nds
- Gilts and Bunds are quoted in decimals. Treasuries are quoted in 32nds of a point: 101-08 is 101.25, and a “+” adds half a 32nd. Gilts and Treasuries normally settle the next business day (T+1).
What a buyer pays
Dirty = clean + (C ÷ 2) × d ÷ D; 99-16+ = 99 + 16.5 ÷ 32
- C
- annual coupon per 100 of face value
- d
- days since the last coupon
- D
- days in the coupon period (181–184 for a half-year)
- +
- half a 32nd (1/64) in a Treasury quote
How it works
1. A bond is a loan
When a government needs to borrow, it sells bonds. Buy a 10-year UK government bond for £100 and you are lending the government £100 for ten years. It pays you interest along the way and gives your £100 back at the end. In the UK these bonds are called ; in the US, Treasuries; in Germany, .
2. Coupon and maturity
The interest is called the coupon. It is a percentage of the bond’s face value, the amount repaid at the end, which prices treat as 100. A 4% coupon pays £4 a year for every £100. Gilts and Treasuries pay it in two halves, every six months. The date the bond is repaid is its maturity.
3. Short, long and inflation-linked
Governments borrow for different lengths of time. last a year or less and pay no coupon: you buy them below 100, get 100 back, and the gap is your interest. Bonds run for years, out to 30 and beyond. (in the US, ) raise their payments with inflation, so rising prices don’t eat your return.
4. Prices are per 100
Once issued, bonds are bought and sold every day, and their price moves. Prices are quoted per 100 of face value: a gilt at 96.40 costs £96.40 for each £100 it will repay. Buy below 100 and you get back more than you paid. Buy above 100 and you get back less, usually because the coupon is higher than rates today.
5. Interest builds up every day
Coupons arrive twice a year, but a bond earns interest every day. Buy halfway between two payments and the seller has earned half a coupon that you will collect on payment day. So you pay it to them when you buy. That amount is the .
6. Clean and dirty prices
The price on screen leaves accrued interest out: it is the . What you actually pay, the clean price plus accrued interest, is the . Quoting clean means the price moves only when the bond’s value changes, not just because another day has passed.
7. US prices come in 32nds
Gilts and Bunds are quoted in decimals, like 96.40. US Treasuries use 32nds of a point instead: 99-16 means 99 and 16/32, which is 99.50. A “+” adds half a 32nd, so 99-16+ is 99.515625. When a headline says Treasuries fell 12/32nds, that is 0.375 points.
Worked example
You buy £5m nominal of a gilt paying a 4¼% coupon at a clean price of 97.84. It is 73 days since the last coupon, in a 181-day coupon period.
- Half-year coupon: 4.25 ÷ 2 = 2.125 per 100.
- Accrued: 2.125 × 73 ÷ 181 = 0.857 per 100.
- Dirty price: 97.84 + 0.857 = 98.697 per 100.
- Cash: £5,000,000 × 98.697 ÷ 100 = about £4,934,850, paid at settlement on the next business day.
About £4.93m: the clean price plus 0.857 of accrued interest per 100.
Check yourself
7 quick questions on the explanation above.
Practice
New numbers every set. Misses and guesses go into your review deck.
In the interview
Answer out loud in under a minute, then compare.
Why do bonds trade on clean prices?
How does a gilt differ from a Treasury in quoting and settlement?
What’s an index-linked gilt, and who buys it?
Remember
Dirty = clean + accrued; 99-16+ = 99.515625
Bonds are quoted clean, but you pay the dirty price: the clean price plus the coupon the seller has already earned.
Sources
- UK Debt Management Office — Glossary: ex-dividend period and T+1 settlement
- UK Debt Management Office — Official Operations in the Gilt Market: an Operational Notice (1 April 2026)
- TreasuryDirect — TIPS (Treasury Inflation-Protected Securities)
- UK Statistics Authority — Response to the joint consultation on reforming the methodology of the Retail Prices Index
- Federal Reserve Bank of San Francisco — Do Adjustment Lags Matter for Inflation-Indexed Bonds?
Definitions and maths are standard textbook material; dated facts link to the sources above. Worked numbers are illustrative.