GOVERNMENT BONDS

Government treasuries are a major source of Government funding and are issued to the market via auctions in the primary market (see appendix on Bond Auctions for further details).

Government bonds once purchased can then be traded in the secondary market often changing hands many times before maturity. It is in this secondary market that most trading occurs. Like all bonds, Government bonds have maturity dates and are normally classed into three categories:

• Bills – Debt securities maturing in less than 1 year
• Notes – Debt securities maturing in 1-10 years
• Bonds – Debt securities maturing in 10 years+

Government bonds are probably the most liquid type but are also regarded as safe debt, however there is risk involved with developing countries which have been known to default. The main Government issued bonds to watch are the U.S, U.K, Germany, France, and Japan. Government bonds also include municipal bonds (munis) these are bonds issued by states, cities, counties, or districts to raise money to finance their own operations, or pay for projects such as schools, hospitals or power plants etc…