Government bond
A
government bond is a
bond issued by a national government denominated in the country's own
currency. Bonds issued by national governments in foreign currencies are normally referred to as
sovereign bonds.
Government bonds are usually referred to as
risk-free bonds, because the government can raise taxes or simply print more money to redeem the bond at maturity. Some counterexamples do exist where a government has defaulted on its domestic currency debt, such as Russia in
1998, though this is very rare.
As an example, in the US,
Treasury securities are denominated in
US dollars and are the safest US dollar investments. In this instance, the term
risk-free means free of
credit risk. However, other risks still exist: such as currency risk for foreign investors (for example non-US investors of US Treasuries would have received lower returns in
2004 because the value of the US dollar declined against most other currencies). Secondly, there is
inflation risk - in that the principal repaid at maturity will have less purchasing power than anticipated if the inflation outturn is higher than expected. Many governments issue
inflation-indexed bonds, which protect investors against inflation risk.
An example of somewhat risky bonds issued by a government can be given with countries that have less than perfect capabilities of conducting financial policies. Such an example is
Bulgaria due to its being dependent on the world economy and economic institutions much more than, say, the US. Some of this country's bonds were only given an A-scale rating after 2004. As of February 2006 Standard & Poor's rates Bulgaria's long-term debt denominated in domestic currency at BBB+. And this rating is the result of almost a decade of constantly decreasing risk (and increasing ratings). We should also note that this country's short-term debt is in fact currently rated A.
Government bonds are issued through agencies that are part of the government's treasury department, for example
*
Bunds are bonds issued by the
German Finance Agency, denominated in
euros
*
Gilts are bonds issued by the
UK Debt Management Office and are denominated in
sterling*
US Treasuries are issued by the
Bureau of the Public Debt*
Government debt*
List of government bonds=List of government bonds from the main issuers=
for a comprehensive list of government bonds, see List of government bonds (AA-/A2)
Issued By: Ministry of Finance (MoF)*Japanese Government Bonds (JGBs)
**Revenue Bonds/Straight Bonds
**Financing Bills
**Subsidy Bonds
**Subscription Bonds
**Contribution Bonds
**Demand Bonds (kofu kokusai)
Ministry of FinanceEurozone
(AAA/Aaa)
Issued By: Agence France Trésor, the French Debt Agency
*
OATs
**
BTFs - bills
**
BTANs - 1 to 6 year notes
*
Obligations assimilables du Trésor (OATs) -
**TEC10 OATs - floating rate bonds indexed on constant 10year maturity OAT yields
**OATi - French inflation-indexed bonds
**OAT€i - Eurozone inflation-indexed bonds
Agence France Trésor (AAA/Aaa)
Issued By: Finanzagentur GmbH, the German Finance Agency
*Bunds
*
Bubill - bills
*
Bundesschatzanweisungen (
Schätze) - 2 year notes
*
Bundesobligationen (
Bobls) - 5 year notes
*
Bundesanleihen (Bunds) - bonds
Finanzagentur GmbH (AA- "with negative outlook"/Aa2)
Issued By: Dipartimento del Tesoro*
BTPs
*
Buoni Ordinari del Tesoro (BOTs) - bills up to 1 year
*
Certificati del Tesoro Zero Coupon (CTZ) - bills up to 2 year
*
Buoni del Tesoro Polianuali (BTPs) - bonds
*
Certificati di Credito del Tesoro (CCTs) - floating rate notes
*
BTP Indicizzato all'Inflazione - inflation linked bonds
Dipartimento del Tesoro (AAA/Aaa)
Issued By: UK Debt Management Office*
Gilts**
Conventional Gilts**
Index-linked Gilts**
Double-Dated Gilts**
Undated Gilts**
Gilt StripsUK Debt Management Office (AAA/Aaa)
Issued By: Bureau of the Public Debt*
US Treasuries**
Treasury bill**
Treasury note**
Treasury bond**
TIPS**
Savings bondBureau of the Public Debt
