Guide to Government Bonds: How to Invest in Public Debt

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This piece of paper is a virtual one that tells us how much we have lent to the government, when it will repay us, and what the interest rates are.

This piece of paper is called a “Government Bond.” Essentially, it’s a written commitment from the government to return the money you’ve invested, plus a little extra called “interest.” Interest is a way to thank you for lending your money to the government.

Every Government Bond has some important information:

  1. Face Value: This is the initial value of the bond, how much you gave to the government.
  2. Interest Rate: It’s what the government promises to give you on top when it repays your money.
  3. Maturity Date: It’s the moment when the government will repay your money, for example, in 5, 10, or 20 years.

Now, you own this Government Bond, and you can hold it until it matures or sell it to other people. Some Government Bonds can be sold on the market like any other commodity, which means their value can change over time, depending on demand.

So, Government Bonds are instruments of public debt issued by governments to finance activities and cover budget deficits. These bonds represent a commitment from the government to repay the invested capital and pay interest according to the conditions specified at the time of issuance.

United States Government Bonds

The United States issues various types of government securities to finance its operations and public debt. Some of the main types of U.S. government securities include:

  1. Treasury Bills (T-Bills): These are short-term securities, typically with maturities of 4 weeks, 13 weeks, 26 weeks, or 52 weeks. They are issued at a discount to their face value and do not pay periodic interest. Investors earn the difference between the purchase price and the face value at maturity.
  2. Treasury Notes (T-Notes): These are medium-term securities with maturities ranging from 2 to 10 years. They pay interest every six months.
  3. Treasury Bonds (T-Bonds): These are long-term securities with maturities exceeding 10 years. Like T-Notes, they pay interest semiannually.
  4. Treasury Inflation-Protected Securities (TIPS): These securities are designed to protect investors from inflation. Their principal value is adjusted based on the Consumer Price Index (CPI), and interest is paid every six months.
  5. Savings Bonds: These are long-term savings securities sold directly to the public. They come in two main types: Series EE with a fixed interest rate and Series I with inflation-linked returns.
  6. Floating Rate Notes (FRNs): These securities have interest rates that vary based on a reference rate, such as the federal funds rate or short-term Treasury rates. These bonds can help investors hedge against interest rate fluctuations.
  7. STRIPS (Separate Trading of Registered Interest and Principal of Securities): STRIPS allow investors to separate the interest and principal components of a security and trade them separately.
  8. Agency Securities: These securities are issued by government agencies like Fannie Mae and Freddie Mac to fund the housing sector. While not directly guaranteed by the federal government, they are often considered safe due to the implied government backing.
  9. Municipal Bonds: Although not federal securities, Municipal Bonds (or “munis”) are issued by local and state governments in the United States. They are used to finance local projects and operations.
  10. Savings Bonds for Education: This category of Savings Bonds is specifically aimed at funding education expenses.

United Kingdom Government Bonds

he United Kingdom issues various types of government securities, known as “gilts,” which are similar to government securities issued by other countries. These securities are issued by the British Treasury to finance public debt and government operations. Here are some of the main types of UK government securities:

  1. Long Gilts: These are long-term government securities with maturities exceeding 15 years. They pay semi-annual interest and are issued with various maturities, such as 20, 30, or even 50 years. They are often considered low-risk investments.
  2. Medium Gilts: These securities have maturities ranging from 5 to 15 years. They also pay semi-annual interest.
  3. Short Gilts: These securities have maturities of less than 5 years and are issued to finance short-term UK public debt. They pay semi-annual interest.
  4. Index-Linked Gilts: These are inflation-linked securities, which means their principal value increases based on the Consumer Price Index (CPI). Interest is calculated on the increasing principal value and paid every six months. These securities provide protection against inflation.
  5. Undated Gilts (Consols): These are perpetual securities without a specific maturity date. The government pays interest on these securities indefinitely. However, the government has the discretion to redeem the principal at any time.
  6. War Loans: These are government securities issued during the First and Second World Wars to finance wartime efforts. Most of these securities have been redeemed, but some remain in circulation and continue to pay interest.
  7. Treasury Bills: These are short-term securities with maturities of less than 1 year. They are issued to meet the short-term financing needs of the government.
  8. Retail Savings Bonds: These are savings bonds offered directly to the public. They can have various maturities and features depending on the current offering.

Canadian Government Bonds


Canada issues various types of government securities known as “Government of Canada Bonds” to finance public debt and government operations.

  1. Government of Canada Bonds (GOC Bonds): These are long-term government securities with maturities ranging from 2 to 30 years or more. They pay semi-annual interest and are considered low-risk investments. Investors can choose from various options, including Canada Bonds (with maturities of 2, 3, 5, 10, and 30 years) and Real Return Bonds (RBBs), which are inflation-indexed.
  2. Treasury Bills (T-Bills): These are short-term securities with maturities of 1, 3, 6, or 12 months. T-Bills do not pay periodic interest but are issued at a discount to their face value, and investors earn the difference between the purchase price and the face value at maturity.
  3. Canada Savings Bonds (CSBs): Although they have not been issued since 2017, Canada Savings Bonds were popular among Canadian savers. They were medium-term securities with maturities of 3, 5, or 10 years and offered competitive interest rates.
  4. Canada Premium Bonds (CPBs): Similar to CSBs, Canada Premium Bonds have not been issued since 2017. They were medium-term securities with slightly higher interest rates than CSBs and offered the chance to win cash prizes.
  5. Provincial Bonds: In addition to federal government bonds, Canadian provinces and territories issue their own government securities to finance their operations and local projects. These bonds vary by province and funding needs.

Australian Government Bonds

Australia issues a variety of government securities known as “Government Bonds” to finance public debt and government operations. Here are some of the main types of Australian government securities:

  1. Australian Government Bonds (AGBs): These are the primary government securities issued by the Australian government. They are available in various maturities, ranging from short to long-term, such as 2, 5, 10, and 30 years. They pay periodic interest, typically every 6 months.
  2. Treasury Bonds: These securities are similar to AGBs and have long-term maturities. They are often issued to finance infrastructure projects and other long-term government funding needs.
  3. Treasury Indexed Bonds (TIBs): These bonds are inflation-indexed, meaning their principal value increases based on the Consumer Price Index (CPI). Interest is paid based on the increasing principal value, providing protection against inflation.
  4. Treasury Notes: These securities have shorter maturities compared to Treasury Bonds, usually ranging from 1 to 5 years. They also pay periodic interest.
  5. Treasury Indexed Notes (TINs): Similar to TIBs but with shorter maturities, typically ranging from 2 to 8 years. Like TIBs, they are inflation-indexed.
  6. Exchange-traded Treasury Bonds (eTBs): These are Australian government securities traded on the stock exchange, allowing investors to trade them like stocks. They offer greater liquidity compared to traditional AGBs.
  7. Government Inscribed Stock (GIS): These are medium-term securities with maturities ranging from 3 to 10 years. They have not been issued by the government since 2013, but some may still be traded.
  8. War Loan Bonds: These bonds were issued during World War II to finance wartime efforts. Most of them have been redeemed, but some are still in circulation.