What are Government Bonds? Definition and Overview

Government Bonds are an investment product offered by a government. 

These exist on all different levels of government, and in slightly different forms from governments all around the world.  

What are Government Bonds?Image Source: Openclipart

The value of government bonds depends on many things, such as the general interest rates, and the stability of the particular level of government that is offering the bond. 

Federal government bonds are often considered the most stable bonds available. 

This is especially true of bonds that are offered by very stable governments such as the United States, United Kingdom or Canada. 

These bonds tend to have quite low interest rates, but there is also a very low chance that the issuer will default on the bond. 

Additional Details on Government Bonds

On the other hand, government bonds issued by countries that are unstable often have higher interest rates, but that is counterbalanced by the much greater risk that the bonds will be defaulted on. 

Countries with very troubled economies may offer high-interest bonds to try to raise funds, but there is certainly a risk in making that investment. 

There are also states and municipalities that may offer their own versions of government bonds.

Municipal bonds offer a particular advantage in that they may provide income that is exempt from certain types of taxation. 

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