Government bonds aredocument certifying the owner's right to receive a stable and regular income as a percentage. They are debt, which means that issuers of securities take money for a bond in a loan. The right to issue such documents belongs to state bodies, for example, the national bank or the Ministry of Finance.
As a rule, these securities servetool to cover the budget deficit. Therefore, state bonds are issued to the stock market if necessary to implement the most important programs to improve the life of the country. This is not the only way to borrow funds from the state, but the most productive. Of course, it is possible to use the credit services of the national bank, but then the volume of loans to credit institutions of the second level will significantly decrease. And this will lead to an imbalance in the entire economy, as commercial credit organizations are considered to be the main link in financing industry and other industries, as well as in improving the well-being of the population.
In addition, government securitieshelp the government to use the savings of the population in economic processes. It's no secret that a considerable portion of cash is in the hands of individuals due to lack of confidence in the banking system. And this is not surprising, since people still remember the hard times of the crisis. Securities issued by the state enjoy great confidence, which makes it possible to work for the benefit of the economy and that part of the funds that was not previously used. They also help attract foreign investment.
In some cases, the government appliesgovernment bonds as a tool regulating the volume of money supply in circulation. For example, if the amount of cash grows too quickly, and consequently, the growth rate of inflation is also significantly accelerated, then measures are required to reduce the latter. The issuance of such securities in this situation allows the state authorities to "pull out" of the turnover some of the cash and hold them. In such a simple way, it is possible to stabilize the exchange rate of the national currency and to strengthen it at the same level.
Why does the population prefer to buygovernment bonds? First, they enjoy a high degree of confidence, since the risk of non-return of funds under such documents is negligible. In this case, the government is a responsible person, which gives confidence in the timely return of money with interest. It is worth noting that the interest rate on securities of the state is considered a reference point for many legal entities involved in issuing their own debt obligations. Recently, the most popular state short-term bonds, and this is due to the unstable economic situation in the country. Whatever the confidence in the return of funds, but getting them for a year or three years is still safer than long-term lending.
In the total mass of government securities,to distinguish two large groups: non-market and market. The latter are freely available and available to all comers. These include treasury notes, bills of exchange and bonds. Non-market can also be sold only on the exchange, for example, pension and savings bonds.
In conclusion, we can conclude thatgovernment bonds are considered risk-free in the securities market. They allow the government to provide financing for important programs aimed at improving the lives of citizens. For example, they are used to implement a plan for housing construction or the development of the agricultural sector.