How do government bonds work?

Bonds.. in general are a debt tool that governments and companies resort to to finance their projects, as they provide a good return for investors in return for an acceptable risk, and the rate of return given varies from one issuing company to another, depending on the company, its history and its financial solvency, as the required return from the investor is for a large company. It will be less than a small company so that the risk in large companies is less.

Bonds are securities of a certain value, and they are one of the investment vessels, and the bond is usually a paper that declares that the owner of the bond is a creditor to the issuer of the bond, whether a government, a company, or a project.

These bonds are usually offered for sale in the money market to collect an amount required for a special project, and for a specific purpose, but the financial credits are not available, and at the same time, the person in need does not want to have a partner for him in what he works, whether because of the inability to participate, such as government and municipal works or schools , or that companies do not want to expand to create new partnerships with the first partners.

So the solution is to ask for an advance to cover the amount you need, and this amount can be collected through a loan from one bank or a group of banks, and bonds can also be offered in relatively small amounts to be purchased within the ability of ordinary people, and these bonds are like a debt paper on this municipality Or the government or the company, and these bonds are sold to people as a means of secured investment, so they offer what they have of the money they have available with certain guarantees by the beneficiary of the loan.

Bonds are offered for sale and put on the market on the basis that the value of the bond is a limited amount, which is a large amount in government bonds, often starting from five thousand dollars, and in companies it starts from 1000 dollars.

As for the term of the bond, it means the maturity period for the value of the bond, which is as follows:

Less than 3 years are called short-term bonds.

3 to 10 years are called medium term bonds.

More than 10 years are called long-term bonds.

As for treasury bills, they are a government debt instrument issued for a period ranging from three months to a year, so they are considered short-term securities. Treasury bills, compared to treasury bonds, are easy to dispose of without the holder incurring losses, because the bill is usually sold at a discount, that is, at a price lower than its face value.

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