Government Bond Market

Government Bond Market
Bonds issued by government in the bond market are amongst the safest forms of investment. These are designated in the currency of the country, where the bond is issued.

Sovereign Bonds
Sovereign bonds, principally issued by the Economic and Monetary Union of the European Union, are also supplied by national governments.
Mainly available in the European bond market, they are normally brought out in foreign currencies.

Risk Free Government Bonds
Government bonds can be redeemed at any time by the government. This is done by printing more currency notes and increasing tax rates.

Government Bond Risks
There are several types of risks associated with the government bonds and are described as follows:
Inflation Risk: this is applicable if the levels of inflation are more than expected. In such cases the principal, which is paid at maturity, is lower than expected.
Currency Risk: this is applicable to foreign investors. If the value of a currency decreases, lower returns might be received on bonds issued in that currency.

Inflation-Indexed Bonds
Inflation-indexed bonds are brought out by the national governments and are supposed to protect the investors from any risk of inflation.

Government Bonds
The following table gives an indication of government bonds issued in various countries and their details:

Bonds Country Currency Issuing Authority Amount of Negotiable Debt in US dollars (2005)
OAT France Euro Agence France Tresor 1,300
JGB Japan Yen Ministry of Finance 6,666
Bunds Germany Euro Finanzagentur Gmb H 1,020
US Treasuries United States US dollar Bureau of the Public Debt 4,000
Gilts United Kingdom Pound Sterling UK Debt Management Office 703
BTP Italy Euro Dipartimento del Tisoro 1,530


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Last Updated on : 10th July 2013

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