Types of Government Bonds
Floating Rate Bonds
As the name suggests, FRBs are subject to periodic changes in rate of returns. The change in rates is undertaken at intervals which are declared beforehand during the issuance of such bonds.
Fixed-rate bonds
Government bonds of this nature come with a fixed rate of interest which remains constant throughout the tenure of investment irrespective of fluctuating market rates.
Sovereign Gold Bonds
The Central Government issues sovereign Gold Bonds, wherein entities can invest in gold for an extended period through such bonds, without the burden of investing in physical gold.
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Advantages of Investing in Government Bonds?
Sovereign Guarantee
Government Bonds enjoy a premium status with respect to the stability of funds and promise of assured returns. As G-Secs are a form of a formal declaration of Government’s debt obligation, it implies the issuing governmental body’s liability to repay as per the stipulated terms.
Inflation-adjusted
Balances held in Inflation-Indexed Bonds are adjusted against increasing average price level. Other than that, the principal amount invested in Capital Indexed Bonds is also adjusted against inflation. This feature provides an edge to investors as they are less susceptible to be financially undermined as investing in such funds increase the real value of the deposited funds.
Regular source of income
As per RBI regulations, interest earnings accrued on Government Bonds are supposed to be disbursed every six months to such debt holders. It provides investors with an opportunity to earn regular income by investing their idle funds.
