Government Bonds
What Are Government Bonds?
A Government Bond is a debt instrument issued by the government to raise money from the public. When you buy a government bond, you are essentially lending money to the government, which in return promises to pay you interest at regular intervals and return the principal amount on maturity.
Key Features of Government Bonds
- Issuer – The Central or State Government.
- Safety – Considered one of the safest investments since they are backed by the government.
- Returns – Investors earn fixed or variable interest (known as the coupon).
- Tenure – Can range from short-term (a few months) to long-term (10 years, 20 years, or even more).
- Liquidity – Tradable in the secondary market, allowing investors to buy or sell before maturity.
Example
- 7.5% Government Bond, 2035 → This means the government will pay 7.5% annual interest until 2035, after which your invested amount is returned.
