A green gilt is an ordinary gilt whose proceeds are earmarked for environmental projects, and reading its own gross yield against the fitted curve — which it sits outside — is how the market's view of it becomes visible.
What makes a gilt green
A green gilt is a government bond of the ordinary kind: a fixed coupon, a fixed maturity, the same £100 repaid at the end. Its difference is what the money is for. HM Treasury publishes a UK Government Green Financing Framework that sets out the kinds of project the proceeds of a green gilt may fund, and the reporting that accompanies the money. A gilt designated under that framework raises funds earmarked for those projects rather than for general expenditure.
That distinction matters because it is easy to imagine a green gilt is a different instrument in how it pays. It is not. It pays its coupon and repays its nominal exactly like any other conventional gilt; what changes is the ring-fencing of the proceeds and the reporting that goes with it. The green label describes the use of the money, not a different cash flow.
The word green is not a market nickname a dealer can attach at will. A gilt is green because the Government's framework says so and the DMO treats it as such. The framework sets the eligible spending categories and the allocation and impact reporting that shows where the proceeds went, so the label rests on a published document rather than on a claim.
That is the sense in which the designation is sourced: the framework is the primary document, and the DMO's own records say which gilts fall under it. A reader who wants to know why a particular gilt is called green should be able to point at the framework and the DMO's designation rather than take the word on trust.
A green gilt sits off the fitted curve
GiltIQ's yield curve is fitted to conventional gilts across their maturities. A green gilt, priced by the market in its own right, is not one of the points the curve is drawn through, so its own gross yield at its term sits alongside a curve that excludes it. The gap between the two is what the market treats as the green premium or discount.
Reading that gap is the point. A green gilt's gross yield at its own term, set against the fitted curve that leaves it out, shows whether the market is asking for a little less yield, or a little more, to hold the green gilt than an ordinary gilt of similar maturity. It is the one view that puts a green gilt on the same terms as everything else around it, rather than quoting it in isolation.
The DMO yield on the same row is quoted on the market's convention — coupons twice a year, counted on actual days — so the green gilt's figures sit on terms that match the rest of the market, which is what makes the comparison against the fitted curve meaningful.
Why the gap exists, and why it is not fixed
The gap is a price like any other, set by the balance of demand. If more buyers want green exposure than there are green gilts to meet them, a green gilt can trade at a lower yield — a premium — than an ordinary gilt of the same term; if demand is thinner, the gap can close or reverse. It is not a fixed number, and it is not a promise; it moves with the market as every other yield does.
The modified duration of the gilt says how much its price shifts when its yield moves by one percent, in years. That is worth remembering when a gap looks large: a given move in the green gilt's yield translates into a price change scaled by its duration, so a long green gilt's price responds more than a short one's to the same shift in the premium.
None of this is a judgement about green gilts as investments. The gap is a fact about how the market is pricing the label at a moment; it can grow, shrink or disappear, and it is described here rather than forecast.
What the figures come from
Each number on a green gilt's row has its own source, and keeping them apart is what stops the green label being confused with the price.
| Figure | Where it comes from |
| Eligibility of projects | The Green Financing Framework |
| Which gilts are green | The DMO's designation |
| A green gilt's gross yield | The day's market pricing |
| Its position against the curve | GiltIQ's fitted curve, which excludes it |
Where to read it
The conventional gilts list carries every gilt, green or not, with its clean price and yields; the yield-curve page is where a green gilt's gross yield can be read against the fitted line at its own term. Reading the two together is how the market's view of a green gilt becomes visible, rather than a claim taken on trust from the label alone.
A green gilt is still a gilt
It is worth restating what a green gilt is not. It pays an ordinary fixed coupon, matures on a fixed date and repays £100 per £100 nominal, so every figure on its row — clean price, accrued interest, dirty price, gross yield, DMO yield — is worked exactly as for any other conventional gilt. The green label changes what the money funds; it does not change the arithmetic.
That means a green gilt can be read with the same habits as any other: the clean price against the curve, the accrued interest to the settlement date, the modified duration for the price sensitivity. The label is one more fact about the gilt, not a separate way of valuing it.
Background, not advice
This article explains what makes a gilt green and how a green gilt's yield relates to the fitted curve; it is general background, not investment, tax or legal advice for any reader's circumstances. The framework, the DMO designation, the market price and the curve are the primary sources, and the premium they reveal is a fact about the market rather than a reason to hold one gilt over another.