Types of Government Bonds

Types of Government Bonds

The Government Securities are of the following types.

• Dated Securities
• Zero CouponThe interest paid on a bond expressed as a percentage of the face value. If a bond carries a fixed coupon, the interest is paid ..... Bonds
• Floating rate Bonds
• Call / Put OptionAn option that gives the right to sell a fixed number of securities at a specified price (the strike price) within a specified period of ..... Bonds
• Dated Securities: Dated Securities have fixed maturity and are identified with the date of maturity. They have either fixed rate of interest or coupon rates which are semiannually payable.

  For example: 6.85% GOI 2021 means

  • It will mature in 2021
  • The coupon or interest rate is 6.85% paid annually (at 6 months intervals usually)
• Zero Coupon Bonds: Zero Coupon Bonds are the securities which are issued at Face ValueThe value that appears on the face of the scrip, same as nominal or par value of share/debentures. and redeemed at Par ValueMeans the face value of securities. .
  
  • They are not issued now. Zero coupon bonds were issued in 1990s only.
• Floating Rate Bonds: These refer to the changing interest rate bonds. The interest rate or coupon rateThe interest rate stated on the face of coupon. Cover (1) To take out a forward foreign exchange contract. (2) To close out a short ..... is higher than a Benchmark rate and usually linked to that benchmark rate. When the benchmark rate increases, the coupon rate also increases.
• Bonds with Call / Put Option: The Call/ Put Option bonds were issued in 2002 for the first time. The call and put option means that the bond A negotiable certificate evidencing indebtedness -a debt security or IOU, issued by a company, municipality or government agency. A bond investor lends money to the ..... holder can sell it back to the government and Government could buy it from the bond holder, after a prefixed period.