What are the different types of government bonds? A government bond is financial tool or instrument used by the government to regulate the volume of circulating money in the country’s economy. Investing in various types of government bonds is secure or risk free and have surety of returns compared to stock and binary investment and it’s easier to redeem them. In case of any cash crunch challenging the government, it can print money to pay out its debts. This is because it is very difficult for a government to fail to account for its domestic currency debts.
These bonds are loaned by individuals, organizations or firms that have the cash to invest. Therefore, in this case the government is the borrower that needs financial assistance to finance its various programs or activities.
In otherwise, a bond a debt investment in which the investor lends money for certain duration stipulated by the government. Most of the government bonds are traded in the country’s local currency. But also, the Government Issues bonds in foreign currencies and these are called the sovereign bonds.
The following governments are the primary issuers of bonds: Gilt of England, US Treasuries, government of Japan (JGBs), France (OATS), Italy’s BTPs and Bonds of Germany. They are the oldest issuers of bonds. However, these are some of the well-known types of government bonds:
US Treasury Issues
These types of government bonds are the most secure when it comes to public investment as opposed to others. This type of government bonds have very low interest rates but its interest is not taxed also are instruments for long term measures for debts. These are the treasury bills that mature after 10 years and they are issued at $1000 – $1000000, while the treasury notes which are also referred as T-notes are liquid measures to debts. They mature between 2-10 years and are offered at $1000.
These types of government bonds are offered by the financial institutions owned by the government. In the United States the Government National Mortgage (Ginnie Mae), the Student Loan Marketing Association ( sallie Mae) etc. are the ones responsible for offering agency bonds to the public.
Municipal and Corporate Bonds
There are two main forms of municipal bonds: Revenue bonds which include university and college revenue bonds, airport revenue bonds etc. Other forms of municipal bonds are structured securities, issued bonds and refunded bonds.
These types of government bonds are the ones that give financial supports needed for municipalities to carry out its daily activities and maintaining their areas. Hence, countries, townships and districts issue such bonds to attract cash that would look for the municipalities and their infrastructure.
There are also two types of corporate bonds namely convertible and callable corporate bonds. The callable are the ones that can be bought back before its maturity, whereas convertible can be changed to common stock. The corporate bond is usually huge and majorly issued to finance infrastructural development such as bridges, buildings and roads.
Zero Coupon Bonds
This type of government bonds are issued by quite a number of entities.