Financial Success Guide

What are Government Bonds?

Section 24 Module 6

Note: The typical rates of return quoted above are from government bonds in developed countries. Developing countries typically offer higher rates of interest on their government bonds.

Government Bonds

  1. When you buy a government bond, you are lending money to the government of that country.
  2. The government bond is a debt instrument, and the government owes you the money.
  3. The ability of a Government to pay back its debt is called its Sovereign Rating.
  4. The government uses your money for national spending & pays a fixed interest on your investment.
  5. Government Bonds are easy to buy, but they usually offer lower rates of returns than corporate bonds.
  6. Government bonds are capital protected, and the chances of money being returned to you are higher because the government can print money.
Remember - Although Government Bonds are capital protected, the government can default on their payments or even delay paying back the money.