Author Box
Articles Categories
All Categories
Articles Resources

Taking a Look at Government Bonds or Gilts

April 10, 2012 | Comments: 0 | Views: 133

Government bonds are essentially financial instruments which are sold by a government to other people/countries. Essentially, they provide the government with a way to borrow money from the people, which in turn offers them a virtually secure investment opportunity with a guaranteed return.

Throughout the world, government bonds are issued when the various governments need to raise money. In the UK - the government issues special 'gilts' for set amounts which can be bought by anyone. After a period of years, these government bonds mature at a set rate, and once they have 'matured' i.e. reached their expiry date, the government buys them back.

For many, the great thing is that they really are virtually no risk, because they are backed by the government, so it's unlikely that they'll be defaulted upon, in the worst case scenario - governments will simply raise taxes in order to pay back the government bond. As a result, while interest rates aren't fantastic compared to other forms of investment, it's seen by many to be highly secure.

Today, there are many ways to buy government bonds. The government may sell them directly through a broker, or alternatively bonds can be put up for auction and bought part-way through the bond's lifetime - creating a way for people to sell them early and get their money back. The good news is with a government bond, you're always guaranteed to get at least your money back, even if you auction it early.

Often, they are used in tandem with other forms of investment due to the fact they offer relatively little risk; in fact the main risks are for those who buy bonds of a different country as over time foreign exchange rates, meaning that over the bond's life - it might become worth more or less than what it should be worth upon maturity.

When looking at what they are and where to get them, it's possible for just about anyone to purchase and acquire them, although in many cases, they have to be purchased through a broker. For many countries, there is a minimum value on a government bond, for example in the USA it is $1,000 and in the UK it is £100 pounds.

In some countries such as the UK index linked bonds are proving popular due to the fact they offer more risk/reward than traditional bonds, however this does present a degree of risk due to the fact that the bonds are linked to the retail profit index. When times are bad, obviously the value of the bond decreases.

Today, many argue that government bonds are in fact a bad investment due to the recent financial crisis of 2008 and 2009. However, what are government bonds for? They are financial instruments that allow people to essentially help the government out. For this reason alone, they are still a valuable investment choice because government bonds will always be paid back at maturity. While low interest rates might mean there's not much profit in the bond, it's going to be worth at least its face value.

As a freelance writing professional, Ed Thomson has been creating content that interests readers for around five years. If you're interested in hiring a writing professional like Ed, he offers a range of professional writing services for blogs, web content and SEO.

Source: EzineArticles
Was this Helpful ?

Rate this Article

Article Tags:

Government Bonds


Financial Instruments


Buy Government Bonds


Government Gilts



Rather than blame others, take personal responsibility to reduce our dependence on oil by using less of petroleum derived products. Repeatedly we are hearing about oil spills, rising prices on oil

By: Kyles Humphrey l News & Society > Energy l October 17, 2012 lViews: 234

Traditional analysis of debt and deleveraging (the process where households, corporations and governments are forced to reduce their overall debt) is often biased and incomplete. Opinions of how to

By: Ben Esget l News & Society > Economics l August 11, 2012 lViews: 295

In this high paced digital age, it's easy to become displaced from the people and places around you. However, it's important to support your community and your neighbors who live in it, and work hard

By: Monai Gupta l News & Society > Politics l July 11, 2012 lViews: 332

In a bold, unpredictable move, President Obama declared on Monday his desire to extend the Bush-era tax cuts for all but the highest-income earners, by which he means anyone richer than Al and Peg

By: Scott Spiegel l News & Society > Politics l July 10, 2012 lViews: 228

Bipartisanship isn't always sweet. Especially when it comes to the politics of sugar.

By: Larry M. Elkin l News & Society > Politics l July 09, 2012 lViews: 237

In a direct reflection of the financial market's currently unsteady nature, the wholesale energy markets tumbled to a four-month low at the end of May. The bearish market was thanks to the continuing

By: Graham N Paul l News & Society > Energy l July 09, 2012 lViews: 222

Traditional analysis of debt and deleveraging (the process where households, corporations and governments are forced to reduce their overall debt) is often biased and incomplete. Opinions of how to

By: Ben Esgetl News & Society > Economicsl August 11, 2012 lViews: 295

There has been a trend for many governments around the world to augment national budgetary resources by incurring debt. This debt is raised through deficit budgets supplemented by quantitative

By: Ashok Malhotral News & Society > Economicsl April 25, 2012 lViews: 242

Not long ago, I had the opportunity to discuss economic philosophy with something that was less-than-human. Now you might think that this is a negative, but I assure you it isn't. Nevertheless, when

By: Lance Winslowl News & Society > Economicsl April 25, 2012 lViews: 191

The economy suffers when banks concentrate on collecting fees rather than deposits. And on making trades rather than loans.

By: Larry M. Elkinl News & Society > Economicsl April 24, 2012 lViews: 208

Anyone on a budget can benefit using money saving tips. With the uncertain political and economic climate, it pays to turn over a few stones.

By: George Wul News & Society > Economicsl April 23, 2012 lViews: 225

This article discusses the need for having a long-term food supply as part of an emergency preparedness plan during uncertain economic times. No more than ever, this is an issue that needs to be

By: Ashley Buenol News & Society > Economicsl April 22, 2012 lViews: 190

We take a look at the cultural importance of African masks, where they come from and why not every African mask is the same... African masks, to many are perhaps some of the most ornate handicrafts

By: Ed Thomsonl Arts & Entertainment > Humanitiesl April 10, 2012 lViews: 259

Discuss this Article

comments powered by Disqus