List of Government Bonds Explained in Detail

Government bonds are a type of investment that allows individuals to lend money to governments, earning interest in return. They're a low-risk option, backed by the government's credit and ability to repay.

Treasury bills, or T-bills, are a type of government bond with a short-term maturity, typically ranging from a few weeks to a year. They're often used as a cash management tool for governments and investors alike.

In contrast, long-term government bonds, like those offered by the US Treasury, can have maturities of 10, 20, or even 30 years. These bonds offer a higher return on investment, but come with a higher level of risk.

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The history of government bonds is a fascinating story that spans centuries. In 1917, the US government issued $21.5 billion in Liberty bonds to finance World War I, marking a significant shift in how governments raised funds.

To finance the war effort, the government sold these bonds at subscription, where the coupon price was set and the bonds were sold at par value. This process was completed in as little as one day, but often took several weeks depending on demand.

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The Liberty bonds were later refinanced with variable short and medium-term maturities, and the government issued debt through fixed-price subscription. However, this system suffered from chronic over-subscription, where interest rates were so attractive that there were more purchasers of debt than required by the government.

The government eventually shifted to an auction system in 1929, where Treasury bills were sold to the highest bidder. This system allowed the market to set the price, rather than the government.

The Treasury's first auction on December 10, 1929, resulted in the issuing of $224 million three-month bills, with the highest bid at 99.310 and the lowest bid accepted at 99.152.

Here's a brief timeline of the evolution of government bond issuance:

This shift to an auction system marked a significant change in the way governments raised funds, and paved the way for the modern government bond market we see today.

The Government Account Series is the principal form of intragovernmental debt holdings, where the government issues securities to federal departments and entities like the Federal Deposit Insurance Corporation.

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Treasury bills, also known as T-bills, are zero-coupon bonds that mature in one year or less, bought at a discount of the par value and eventually redeemed at that par value to create a positive yield to maturity.

The main types of U.S. Treasuries are bonds, notes, and bills, with bills maturing in less than a year, notes in two to five years, and bonds in 20 or 30 years, all backed by the full faith of the U.S. government.

Here's a breakdown of the main types of U.S. Treasuries:

Inflation-Indexed Bonds (IIBs) are a unique financial instrument that ensures real returns remain constant, allowing investors to safeguard their portfolio against inflation rates.

Fixed-rate bonds are a type of government bond that offers a fixed rate of interest throughout the investment tenure, regardless of market fluctuations.

The coupon rate on a government bond is mentioned in its nomenclature, such as 7% GOI 2021, where 7% is the rate of interest on the face value.

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A fixed-rate bond's interest rate remains constant, unlike market rates, which can change over time.

Here's a breakdown of the components of the 7% GOI 2021 bond:

This fixed rate provides a predictable return on investment, making it an attractive option for investors seeking stability.

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Coupon stripping is a practice that involves separating the interest and principal portions of a security, allowing them to be sold separately.

This practice originated in the days before computerization, when treasury securities were issued as paper bearer bonds, and traders would literally separate the interest coupons from the paper securities.

STRIPS, or Separate Trading of Registered Interest and Principal Securities, are the modern versions of coupon stripping. They are products of investment banks or brokerage firms.

The Treasury does not directly issue STRIPS, but it does register them in its book-entry system.

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Inflation-Indexed Bonds are adjusted against increasing average price levels, ensuring the real value of your investment remains constant.

These bonds are mainly issued for retail investors and are indexed as per the Consumer Price Index (CPI) or Wholesale Price Index (WPI).

The principal and interest earned on Inflation-Indexed Bonds are both accorded with inflation, safeguarding your portfolio against inflation rates.

Capital Indexed Bonds, on the other hand, only adjust the principal or capital proportion of your balance against inflation.

This feature provides an edge to investors as they are less susceptible to financial losses, allowing your deposited funds to increase in real value.

Inflation-adjusted balances in these bonds ensure that your investment grows with the economy, rather than shrinking due to inflation.

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Zero-Coupon bonds are a type of government bond that doesn't earn any interest. They're actually created from existing securities.

The earnings from Zero-Coupon bonds come from the difference in issuance price (at a discount) and redemption value (at par). This is because they're not issued through auction, but rather created from existing securities.

You can buy Treasury bills, which are a type of Zero-Coupon bond, for as little as $100, although they used to be $1,000 prior to April 2008.

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Government bonds are a type of investment that's backed by the government, making them virtually risk-free.

These bonds are issued to finance government spending activities, and there are four types: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation-Protected Securities (TIPS). T-bonds, in particular, have long durations, issued with maturities of 20 and 30 years.

Government bonds make interest payments semiannually, and the income received is only taxed at the federal level. This can be a big advantage for investors who want to keep their retirement savings risk-free.

The U.S. government guarantees the stability of funds and promise of assured returns on government bonds, making them a premium investment option. This is because government bonds are a form of a formal declaration of the government's debt obligation.

Here are some key characteristics of government bonds:

Government bonds can be purchased through a bank or broker, and they can be used to provide a steady income in retirement or to set aside savings for a child's education or other major expenses.

You can invest in government bonds, which come in various types.

In India, there are multiple variants of government bonds.

To buy T-bonds, you can head to Treasurydirect.gov, create an account, and purchase your bonds directly from the government on the website.

Government bonds are a low-risk investment option, allowing you to earn interest on your investment.

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U.S. savings bonds have been around since 1935, created in the form of Series E bonds, also known as war bonds, to finance World War II. They were widely sold and remained popular after the war, often used for personal savings and given as gifts.

In 2002, the Treasury Department started changing the savings bond program by lowering interest rates and closing its marketing offices. As of January 1, 2012, financial institutions no longer sell paper savings bonds.

There are currently two forms of savings bonds: Series EE and Series I bonds. Series EE bonds pay a fixed rate and are guaranteed to pay at least double the purchase price when they reach initial maturity at 20 years. Series I bonds have a variable interest rate that consists of two components: a fixed rate and a variable rate reset every six months based on the current inflation rate.

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Here's a breakdown of the two types of bonds:

China also offers government bonds, with yields ranging from 1.055% to 1.909% for different maturity periods.

The U.S Government Series offers a range of bond options for investors and government entities alike. The Government Account Series is the principal form of intragovernmental debt holdings, where the government issues securities to federal departments and federally-established entities.

One notable type of bond is the U.S. savings bond, which was created in 1935 and has been a popular option for personal savings and gifts. Savings bonds are offered in two forms: Series EE and Series I bonds.

Series EE bonds pay a fixed rate and are guaranteed to pay at least double the purchase price when they reach initial maturity at 20 years. Series I bonds, on the other hand, have a variable interest rate that consists of a fixed rate and a variable rate reset every six months based on the current inflation rate.

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The State and Local Government Series (SLGS) is issued to government entities below the federal level, which have excess cash obtained through the sale of tax-exempt bonds. SLGS securities are exempt from the federal tax code restriction on investing excess cash in securities with higher yields.

Here's a breakdown of the main types of U.S Government Series bonds:

As of June 30, 2023, the top foreign holders of U.S. Treasury securities are led by Japan, with a total of $1.1 trillion in debt.

Japan's holding has actually decreased by 10% since June 2022, a significant drop.

China comes in second, with $834.1 billion in U.S. Treasury securities, a decrease of 11% from the previous year.

The United Kingdom is in third place, with a notable increase of 9% in its holdings, totaling $670 billion.

Here's a breakdown of the top foreign holders of U.S. Treasury securities:

These countries, along with others, make up the majority of foreign holders of U.S. Treasury securities, with a combined total of over $7 trillion.

The United States has a diverse range of government bond yields, with varying terms and conditions. China 10Y bond has a yield of 1.596, while Germany 10Y bond has a yield of 2.4475.

China's 5-year bond yield is 1.327, a decrease of 1.26% from the previous yield. Germany's 5-year bond yield is 2.265, with a change of 0.00% from the previous yield.

China's 30-year bond yield is 1.845, a decrease of 0.70% from the previous yield. Germany's 30-year bond yield is 2.666, with a change of 0.00% from the previous yield.

Here's a comparison of China and Germany's 10-year bond yields:

Germany's 20-year bond yield is 2.671, a decrease of 0.37% from the previous yield. China's 20-year bond yield is 1.909, with a change of -1.19% from the previous yield.

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In India, government bonds come in various forms, including multiple variants.

The Government of India issues these bonds to raise funds for its activities, and they offer a way for individuals and institutions to invest in the country's debt.

One of the variants of government bonds in India is discussed below.

Government bonds in India are a type of debt instrument that allows investors to lend money to the government, which then uses the funds for various purposes.

These bonds are often used by the government to finance its budget deficit or to refinance existing debt.

The multiple variants of Government bonds in India are discussed below –

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Sovereign Gold Bonds offer a unique investment opportunity, allowing you to invest in gold without the burden of physical storage.

These bonds are priced based on the simple average of gold's closing prices three days before issuance, and their value is denominated in grams of gold.

Individuals and Hindu Undivided Families can hold up to 4 kg of Sovereign Gold Bonds in a financial year, while trusts and other entities can hold up to 20 kg.

Interest on these bonds is 2.50% and is disbursed periodically, with a fixed maturity period of 8 years unless stated otherwise.

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Tax is not levied on interest earnings from Sovereign Gold Bonds.

Investors seeking liquidity can redeem their bonds after the first five years, but only on the date of subsequent interest disbursal.

For example, if you invested in an SGB on April 1st, 2014, you'd need to wait until November 1st, 2019, to receive the redemption amount if you withdraw it on June 1st, 2019.

Japan is the largest foreign holder of U.S. Treasury securities, holding $1.1035 trillion as of June 30, 2023.

The total value of U.S. Treasury securities held by foreign countries is $7.6132 trillion, a 3% increase since June 2022.

China is the second-largest foreign holder of U.S. Treasury securities, holding $834.1 billion as of June 30, 2023.

The United Kingdom is the third-largest foreign holder of U.S. Treasury securities, holding $670.0 billion as of June 30, 2023.

Canada is a significant foreign holder of U.S. Treasury securities, with a 34% increase in holdings to $273.8 billion as of June 30, 2023.

The top 5 foreign holders of U.S. Treasury securities as of June 30, 2023, are:

The yields on Germany's 10-year government bond have been relatively stable, ranging from 2.4475% to 2.4490% over the past few hours.

The Eurozone has a diverse range of government bonds, including Government Bonds, Debt Issuance Programme (DIP and DIP 144A), and Euro Medium Term Note (EMTN).

These bonds are issued by various countries, such as Belgium, Germany, and Italy, and are used to finance public spending and manage debt.

In Belgium, government bonds are known as Obligations linéaires ordinaires (OLOs), while in Germany, they're issued by the German Finance Agency, the German Debt Agency.

The Eurozone also has a range of short-term debt instruments, such as Belgian Treasury Bills BTB, Certificats de Trésorerie (CTs), and German Certificates of Treasury.

Here's a breakdown of the different types of government bonds issued in the Eurozone:

These government bonds play a crucial role in financing public spending and managing debt in the Eurozone, and are a key part of the region's financial landscape.