The list shows a gilt's yield twice, once compounded annually and once on the Debt Management Office's semi-annual convention, and the gap between the two columns is a convention rather than a market move.
One gilt, two yield columns
On the conventional gilts list each gilt carries a gross yield and a DMO yield in adjacent columns, a few basis points apart. They are not two estimates of the same thing that disagree, and the difference is not a signal about the gilt. They are the same quantity — the internal rate of return on the gilt's remaining cash flows — expressed under two compounding conventions. The gross yield compounds once a year; the DMO yield is on the UK Debt Management Office's market convention, with coupons twice a year and days counted on the actual calendar.
Both are correct. A reader who quotes one where the other is meant is not wrong about the gilt, but is answering a slightly different question, and the size of the mismatch is exactly the gap between the columns.
What the two conventions assume
| Convention | Compounding | Coupons | Day count | What it answers |
| Gross yield | Once a year | Reinvested at the same rate | Calendar | What a year-on-year return looks like |
| DMO yield | Twice a year | Paid semi-annually, as the gilt pays them | Actual days | What the market quotes and trades on |
The gross yield assumes coupons are reinvested at the same rate and adds the result up once a year. The DMO yield follows the gilt's own payment pattern: a coupon every six months, discounted back half a year at a time on the actual number of days between payments. Because a conventional gilt does pay twice a year, the DMO convention is the one that mirrors the instrument, and it is the one the market quotes.
The annual figure exists because most readers compare returns on an annual footing, and a once-a-year compounding figure is the one that can sit beside a savings rate or an annual report without a conversion step. It is a presentational choice with a real arithmetic consequence, which is why the site shows both rather than hiding the conversion.
Why the annual figure sits above the semi-annual one
Compounding twice a year at half the annual rate produces slightly more than compounding once at the full rate, because the first half-year's interest earns interest in the second. The annually compounded equivalent of a semi-annual yield y is y plus y squared over four. The gap grows with the square of the level, so it is negligible at low yields and worth knowing at higher ones.
Two illustrative cases show the size. At a semi-annual yield of 4.20%, the annually compounded equivalent is about 4.24%, a gap of roughly four basis points. At 5.00%, the equivalent is about 5.06%, a gap of roughly six basis points. Both are labelled illustrations with their inputs stated, not yields from any gilt on the list; the direction is always the same, with the annual figure above the semi-annual one for a positive yield.
A gap of a few basis points between the two columns is the convention, not the market. A gap that widens or narrows noticeably between two gilts reflects their different yields and maturities, not a mispricing.
Where the net column fits
The net redemption yield is on the annual convention, like the gross yield, with one change: income tax on the coupons is deducted before the yield is solved. That puts it in the same compounding family as the gross column and in a different one from the DMO column, so a reader comparing a net yield with a DMO yield is changing two things at once — the compounding and the tax. The post-tax yield page lays the bands out beside one another for the same reason: the comparison only means something when the convention is held still.
The taxable base matters here as well. The site's net figure taxes the coupon income rather than the whole return, because the redemption of a gilt is treated as a capital gain, and gains on UK gilts are exempt from capital gains tax for individuals under the rules published by GOV.UK. A gilt bought below par therefore carries a larger share of its return outside the income tax net, which is why its net yield sits closer to its gross yield than a high-coupon gilt's does.
Which figure to quote
The honest answer is: whichever one the comparison needs, named clearly. Quoting the DMO figure against a market screen or an external reference yield is right, because those are quoted on the same semi-annual basis. Quoting the annual figure against a savings rate or an annual return is right, because that is the basis those are stated on. Quoting one and calling it the other is the only mistake available.
- The list shows both, so a row can be read on either basis without a conversion.
- The difference between them is arithmetic, not information about the gilt.
- The site's curve comparison converts both legs to one basis before differencing them, so a spread in basis points is not contaminated by the convention.
- An external reference yield from a market data provider is usually semi-annual, so it compares with the DMO column rather than the annual one.
For a single gilt, the two columns are two answers to the same question, and the gap between them is a fixed function of the yield. For two gilts, the columns stay comparable as long as the reader stays in the same column across both rows, which is what the adjacent columns are there to make easy.
Background, not advice
This article explains the two yield conventions GiltIQ displays; it is general background, not investment, tax or legal advice for any reader's circumstances. Yields move with prices, and the tax treatment described is the general position for a UK individual rather than advice on any reader's position. The Debt Management Office, GOV.UK and the day's market data are the primary sources for a real yield, convention or tax rule.