In a buffet of debt investments, while the humble Government Bonds may not rank as the most enticing dish in comparison to other investment options, the foundation it can provide your investments is unparalleled.
It wouldn’t be farfetched to say that in most countries, these government securities play an essential function in the entire financial markets by forming the backbone of fixed income securities markets, since they provide benchmark yield and impart liquidity to other financial markets.
When the government securities market efficiently runs as a well-oiled machinery in the economy, as a domino effect, it aids in the development of the country’s corporate debt market.
In this article you will learn all about Government Bonds: What are Government bonds , what are Government Securities, how to buy Government Bonds in India, what are treasury bills, etc.
Government Securities or G-Secs are securities created and issued by the Government for the objective of raising a loan from the Institutional investors & Non-Institutional Investors to manage government’s finances, or any other reason as stipulated by the Government in the Official Gazette. These securities are tradeable debt instruments that are issued either by the Central Government or the State Governments. The central government being the Government of India and state governments like Uttar Pradesh, Tamil Nadu etc.
Among other things, these securities are usually issued by the government to meet its financial requirements like short term needs of cash management operations and long term needs like the country’s infrastructural project developments.
Simply explained, short term Government securities are known as Treasury bills or T-bills. These are called as short term debt instruments because they have a maturity of less than one year. In India, treasury bills are issued by the Central Government that is the Government of India.
Long term Government Securities are known as ‘Government Bonds’ or ‘Dated securities’. Government Bonds are called as long term Bonds because they generally have a maturity period of more than a year usually ranging from 3 to 40 years. Government Bonds are issued by both the Central government and State Governments. Government Bonds or dated securities issued by the State Government are called as ‘State Development Loans’.
Now that you have understood what are G-Secs and the benefits they have to offer, let’s understand how to buy Indian Government Bonds or the process to invest in Govt bonds.
You can invest in Government Bonds through brokers or through the exchange which may get tedious. Or, you can invest with IndiaBonds in 3 simple steps:
The G-Sec market has predominantly been invested in by institutional investors such as banks, mutual funds, and insurance companies. However, recent government efforts are pointing towards encouraging individual investors to invest in government Bonds.
While Bonds in general are a great investment strategy to diversify the portfolio, Government Bonds in specific are a suitable and effective choice for investors inching towards safety and stability. These bonds expose you to negligible risks, guarantee interest payout and principal payment.
Interested to invest? Explore a range of Government Bonds online on IndiaBonds. Browse here!
Disclaimer: Investments in debt securities/ municipal debt securities/ securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully.