Government Bonds

Government bonds are basically fixed income security type. They are absolutely risk free. Investments in these bonds are safer than investing in the stock market. The government bonds of the developed countries are generally regarded as the more secured ones than the developing or the underdeveloped ones.

The concerned governments issue government bonds. They are of different categories and can be differentiated from one another in accordance with their respective time span for maturity. Government bonds have a maturity period of one year to 30 years. However, these bonds are generally not bought at face value and are acquired either at a premium or at a discount.

A bondholder receives a fixed interest rate, which is also called coupon rate during the term of the bond. The interest is paid half-yearly. The entire face value of the bond is received when the bond reaches its maturity date. Government bonds make the investor to claim lots of tax exemptions. A bondholder can sell his government bonds in the secondary market instead of waiting till the maturity date to recover the principal amount and even can realize a profit if the prevailing interest rate falls below the coupon rate after the bond is issued.

Money raised from these bonds is used to finance large projects undertaken by the government. It is used in various parts of the country for welfare activities. The different types of government bonds can be classified into Government Bills, Government Notes and Government Bonds.