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A government bond is a bond issued by a national government denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds.
Risk Government bonds are usually referred to as risk-free bonds, because the government can raise taxes or simply print more money to redeem the bond at maturity. Some counterexamples do exist where a government has defaulted on its domestic currency debt, such as Russia in 1998, though this is very rare. As an example, in the US, Treasury securities are denominated in US dollars and are the safest US dollar investments. In this instance, the term risk-free means free of credit risk. However, other risks still exist: such as currency risk for foreign investors (for example non-US investors of US Treasuries would have received lower returns in 2004 because the value of the US dollar declined against most other currencies). Secondly, there is inflation risk - in that the principal repaid at maturity will have less purchasing power than anticipated if the inflation outturn is higher than expected. Many governments issue inflation-indexed bonds, which protect investors against inflation risk. An example of somewhat risky bonds issued by a government can be given with countries that have less than perfect capabilities of conducting financial policies. Such an example is Bulgaria due to its being dependent on the world economy and economic institutions much more than, say, the US. Some of this country's bonds were only given an A-scale rating after 2004. As of February 2006 Standard & Poor's rates Bulgaria's long-term debt denominated in domestic currency at BBB+. And this rating is the result of almost a decade of constantly decreasing risk (and increasing ratings). We should also note that this country's short-term debt is in fact currently rated A. Issuance Government bonds are issued through agencies that are part of the government's treasury department, for example See also List of government bonds from the main issuers for a comprehensive list of government bonds, see List of government bonds {{JPN}} (AA-/A2) Issued By: Ministry of Finance (MoF) '''Ministry of Finance''' {{FRA}} (AAA/Aaa) Issued By: Agence France Trésor, the French Debt Agency '''Agence France Trésor''' {{DEU}} (AAA/Aaa) Issued By: Finanzagentur GmbH, the German Finance Agency '''Finanzagentur GmbH''' {{ITA}} (A+/Aa2) Issued By: Dipartimento del Tesoro '''Dipartimento del Tesoro''' {{GBR}} (AAA/Aaa) Issued By: UK Debt Management Office UK Debt Management Office {{USA}} (AAA/Aaa) Issued By: Bureau of the Public Debt '''Bureau of the Public Debt''' | ||||||||
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