Government Bond Market
In the
government bond market, the government acts as the issuer of bonds. The bonds, provided in the government bond market, are amongst the safest forms of investment. The government bonds are designated in the currency of the country, where the bond is being issued.
Sovereign Bonds
The sovereign bonds are also issued by the national governments. The sovereign bonds are normally brought out in foreign currencies. The sovereign bonds are mainly available in the European bond markets. They are principally issued by the Economic and Monetary Union of the European Union.
Risk Free Government Bonds
The government bonds can be redeemed at any time by the national governments. They do this by printing more currency notes and increasing the tax rates.
Government Bond Risks
There are several types of risks associated with the government bonds. They may be described as below:
- Inflation Risk - this risk is applicable if the levels of inflation are more than expected. In such cases the principal, that is paid at maturity, is lower than expected.
- Currency Risk - this risk is applicable for the foreign investors. If the value of a currency decreases, they might receive lower returns on their bonds, issued in that currency
Inflation Indexed Bonds
The inflation indexed bonds are brought out by the national governments. These bonds are supposed to protect the investors from any risk of inflation.
Government Bonds
The following table gives an indication of the government bonds issued in various countries and their various 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 |