Consols

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Not to be confused with the Roman officials known as Consuls

Consols is a British government bond (gilt), dating originally from the 18th century. In 1752, the Chancellor of the Exchequer and Prime Minister Sir Henry Pelham converted all outstanding issues of redeemable government stock into one bond, Consolidated 3.5% Annuities, in order to reduce the coupon rate paid on the government debt.

In 1757, the coupon rate on the stock was reduced to 3%, leaving the stock as Consolidated 3% Annuities. The coupon rate remained at 3% until 1888. In 1888, the Chancellor of the Exchequer, George Joachim Goschen, converted the existing Consolidated 3% Annuities, along with Reduced 3% Annuities (issued in 1752) and New 3% Annuities (1855), into a new bond, 2¾% Consolidated Stock under the National Debt (Conversion) Act 1888 (Goschen’s Conversion). As part of the terms of the Act, the coupon rate of the stock was reduced to 2½% in 1903, and the stock given a first redemption date of 5th April 1923, after which point the stock could be redeemed at par value by Act of Parliament.

Consols still exists today: in its current form as 2½% Consolidated Stock (1923 or after), it remains a small part of the UK Government’s debt portfolio. As the bond has a low coupon, there is little incentive for the government to redeem it. Unlike most gilts, which pay coupons semi-annually, because of its age Consols pays coupons four times a year. Also, as a result of its uncertain redemption date, it is typically treated as a perpetual bond.

Given its long life, references to Consols can be found in many places, including literature, such as David Copperfield by Charles Dickens, Howards End by E. M. Forster, and Vanity Fair by William Makepeace Thackeray.