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A government bond is a bond
Bond (finance)

In finance, a bond is a debt security , in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed Maturity ....
 issued by a national government denominated in the country's own currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bond
Sovereign bond

A sovereign bond is a Bond issued by a national government. Bonds issued by national governments in the country's own currency are also referred to as government bonds....
s. The first ever government bond was issued by the English government in 1693 to raise money to fund a war against France. It was in the form of a tontine
Tontine

A tontine is a scheme for raising capital which combines features of a group Annuity , and a lottery....
.

rnment bonds are usually referred to as risk-free bond
Risk-free bond

A risk-free bond is a theoretical Bond that repays interest and :wikt:principal with absolute certainty. In practice, government bonds are treated as risk-free bonds, as governments can raise taxes or indeed print money to repay their domestic currency debt....
s, because the government can raise taxes to redeem the bond at maturity
Maturity

Maturity may refer to:*Sexual maturity*Mature technology, a term indicating that a technology has been in use and development for long enough that most of its initial problems have been overcome...
.






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A government bond is a bond
Bond (finance)

In finance, a bond is a debt security , in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed Maturity ....
 issued by a national government denominated in the country's own currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bond
Sovereign bond

A sovereign bond is a Bond issued by a national government. Bonds issued by national governments in the country's own currency are also referred to as government bonds....
s. The first ever government bond was issued by the English government in 1693 to raise money to fund a war against France. It was in the form of a tontine
Tontine

A tontine is a scheme for raising capital which combines features of a group Annuity , and a lottery....
.

Risk

Government bonds are usually referred to as risk-free bond
Risk-free bond

A risk-free bond is a theoretical Bond that repays interest and :wikt:principal with absolute certainty. In practice, government bonds are treated as risk-free bonds, as governments can raise taxes or indeed print money to repay their domestic currency debt....
s, because the government can raise taxes to redeem the bond at maturity
Maturity

Maturity may refer to:*Sexual maturity*Mature technology, a term indicating that a technology has been in use and development for long enough that most of its initial problems have been overcome...
. Some counter examples do exist where a government has defaulted
Default (finance)

In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract....
 on its domestic currency debt, such as Russia
Russia

Russia , or the Russian Federation , is a list of countries spanning more than one continent country extending over much of northern Eurasia....
 in 1998 (the "ruble crisis"), though this is very rare.

As an example, in the US, Treasury securities
Treasury security

Treasury securities are government bond issued by the United States Department of the Treasury through the Bureau of the Public Debt. They are the debt financing instruments of the U.S....
 are denominated in US dollars and are the safest US dollar investments. In this instance, the term "risk-free" means free of credit risk
Credit risk

Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit ...
. However, other risks still exist, such as currency risk for foreign investors (for example non-US investors of US Treasury securities would have received lower returns in 2004 because the value of the US dollar declined against most other currencies). Secondly, there is inflation
Inflation

In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
 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 bond
Inflation-indexed bond

Inflation-indexed bonds are Bond where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment.....
s, which should protect investors against inflation risk. The protection has been questioned by John Williams' ShadowStats.com, which claims that government-calculated inflation is understated by as much as 5 percent, which also makes inflation-indexed bonds yield a loss.

See also

  • Government debt
    Government debt

    Government debt is money owed by any level of government; either central government, federal government, municipal government or local government....
  • Municipal bond
    Municipal bond

    In the United States, a municipal bond is a Bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds include cities, counties, redevelopment agencies, school districts, publicly owned airports and seaports, and any other governmental entity below the state level....
  • List of government bonds
    List of government bonds

    This is a list of categories of Government bonds around the world.=Main issuers==Country by country data=...


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