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
- When you buy a government bond, you are lending money to the government of that country.
- The government bond is a debt instrument, and the government owes you the money.
- The ability of a Government to pay back its debt is called its Sovereign Rating.
- The government uses your money for national spending & pays a fixed interest on your investment.
- Government Bonds are easy to buy, but they usually offer lower rates of returns than corporate bonds.
- 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.