The terminology surrounding bonds can make things appear much more complicated that they actually are. That’s because each country that issues bonds uses different terms for them.
UK government bonds, for example, are referred to as gilts. The maturity of each gilt is listed in the name, so a UK government bond that matures in two years is called a two-year gilt.
In the US, meanwhile, bonds are referred to as treasuries. Treasuries come in three broad categories, according to their maturity:
- Treasury bills (T-bills) expire in less than one year
- Treasury notes (T-notes) expire in one to ten years
- Treasury bonds expire in expire in more than ten years
Other countries will use different names for their bonds – so if you want to trade bonds from governments outside of the US or UK, it’s a good idea to research each market individually.
You can also buy government bonds that don’t have fixed coupons – instead, the interest payments will move in line with inflation rates. In the UK these are called index-linked gilts, and the coupon moves with the UK retail prices index (RPI). In the US, they are called treasury inflation-protected securities (TIPS).