A government bond is a bond issued by a sovereign government. Government bonds come in a variety of formats and maturities. They can be very short-term instruments (from as little as a one-month maturity) or go out to 30-year bonds or even longer. And they can come with fixed or floating-rate interest payments, and in an inflation-linked format. Government bonds are considered to be one of the most risk-free investments.
Key learning objectives:
Understand how a bond works
Explain why a government might issue debt
Know why bonds in certain countries are considered to be “risk-free”