Government bonds represent a document certifying the right of the owner to obtain a stable and regular income as a percentage amount.They are debt, which means that issuers are taking money for the bond in the loan.The right to issue such documents owned by the public authorities, for example, the National Bank or the Finance Ministry.
As a rule, the securities serve as a tool covering the budget deficit.Therefore, government bonds are issued on the stock market, if necessary, the implementation of major programs to improve the life of the country.This is not the only way of borrowing by the state, but the most productive.Of course, you can use the services of a national bank credit, but then significantly reduced the volume of lending to credit institutions of the second level.This will lead to an imbalance in the whole economy, as commercial lenders considered the main link in the financing industry and other industries, as well as to improve the welfare of the population.
In addition, government securities to help the Government to involve the population's savings in the economic processes.It's no secret that a large proportion of the cash is in the hands of individuals with regard to the lack of confidence in the banking system.This is not surprising, because people still remember the difficult times of crisis.Securities issued by the state, are in great confidence, that allows you to work for the benefit of the economy and that part of the funds that had previously been used.They also contribute to attracting foreign investment.
In some cases, the government uses government bonds as a tool to regulate the money supply in circulation.For example, if the amount of cash increases too rapidly, and hence the rate of inflation is also significantly accelerated the need to take measures to reduce the latter figure.The issue of such securities in the given situation allows public authorities to "pull" from the turnover of the cash and keep them.In this simple way you can stabilize the national currency and to strengthen it at the same level.
Why do people prefer to buy government bonds?Firstly, they enjoy a high degree of confidence, since the risk of default funds for such instruments is negligible.In this case, the government is a responsible person, which gives confidence in the timely repayment of money to pay the interest.It is worth noting that the interest rate on securities of the state is considered a benchmark for many entities engaged in production of its own debt.In recent years, the most popular short-term government bonds, and this is due to the unstable economic situation in the country.Whatever confidence the refund, but to get them for a year or three years, yet safer than long-term loans.
The total weight of government securities can be divided into two major groups: non-market and market.The latter are freely available and accessible to everyone.To those include treasury notes, bills and bonds.Non-market also can be implemented only on the exchange, such as pension and savings bonds.
In conclusion, it can be concluded that government bonds are considered risk-free in the securities market.They allow the government to provide funding for important programs aimed at improving the lives of citizens.For example, are used to implement the plan of housing construction or development of the agricultural sector.
