What are government bonds, why are they issued? Invest In Bonds In India | Buy Bonds Online India Posted by Jeevan Utsav on September 20, 2021

Government bonds are also one of the many investment options. They are considered extremely safe for investment. The reason is that they have government guarantee. These bonds earn a fixed interest. Why does the government issue them and what is their work, let us know more about them.

1. Usually the government issues bonds to meet its fiscal deficit. Through these, money is raised from investors. Earlier only big investors could invest in them. But now even small investors are allowed to invest in them.

2. The maturity period of such bonds is one to 30 years.

3. Fixed Coupon Bonds are the most common government securities that it issues. They have a fixed rate of interest. Interest is paid every half yearly.

4. The interest rates of government bonds on borrowings depend on the market. These are decided through the auction process.

5. Interest rates on government securities are the lowest during that period. This is because they are considered free from credit risk. They have higher interest rates than other bonds of the same duration.

6. The yield of a bond and its value are inversely related. That is, when the yield rises, the bond prices fall. Similarly, when the yield goes down, the bond’s value goes up. Bond yield is the return on the bond.

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NOTE: The information is being presented without consideration of any specific investor’s investment objectives, risk tolerance or financial circumstances and may not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including potential loss of principal.