What Is a Government Bond?

Government bonds are debt certificates issued by the government to investors in order to raise funds and promise to pay interest and repay principal in a certain period of time. They include state bonds, that is, central government bonds, local government bonds, and government-guaranteed bonds. ^[1]

government bond

Government bonds are debt certificates issued by the government to investors in order to raise funds and promise to pay interest and repay principal in a certain period of time. They include state bonds, that is, central government bonds, local government bonds, and government-guaranteed bonds. ^[1]

The nature of government bonds is mainly examined from two aspects: first, from the perspective of form, government bonds are also a kind of marketable securities, which have the general nature of bonds. Government bonds have denominations, and investors can earn interest on government bonds. Therefore, government bonds have the general characteristics of bonds. Second, from a functional point of view, government bonds were originally only a means for the government to make up for the deficit. However, under the conditions of the modern commodity economy, government bonds have become an important means for the government to raise funds and expand public expenditure. With the development of financial markets, It gradually has functions of financial commodities and credit instruments, and has become a tool for the state to implement macroeconomic policies and conduct macroeconomic regulation and control.

1. High safety. government

Local Government Bonds--Introduction

Local government bonds (Local Treasury Bonds) refer to bonds issued by local public institutions with local government revenue in a country. Local government bonds are generally used for the construction of local public facilities such as transportation, communications, housing, education, hospitals and sewage treatment systems. Local government bonds are also generally guaranteed by the local government's tax capacity as debt and interest payments. There are two modes of local bond issuance. The first is direct bond issuance by the local government; the second is national central government bonds, which are then re-loaned to the local government. In some specific cases, local government bonds are also called municipal securities.

Local government bonds, also called local bonds, are bonds issued by local governments such as provinces, cities, counties, and towns. The purpose of issuing such bonds is to

Allocation of local debt

In order to raise a certain amount of funds to meet the funding needs of municipal construction, cultural progress, public safety, natural resource protection, etc. Local bonds in the United States are called municipal bonds. They are mainly divided into two categories: one is ordinary debt bonds guaranteed by state and local government taxes. Their credit ratings are high. The funds raised are usually used for basic municipal services such as education, public security, and fire prevention. Services; the other is income bonds that repay principal and interest based on the proceeds of projects built by the local government, which the government does not guarantee. The funds raised are mainly used for the construction of toll roads, toll college dormitories, toll transportation systems and irrigation systems. Local bonds in Japan are called local bonds, and their interest income is tax-free, and in principle they are not listed on exchanges (except for Tokyo Metropolitan Government bonds). Local bonds are divided into public and private bonds. British local bonds are called local authority bonds and can be listed on the London Stock Exchange. The amount of bonds issued by local authorities is controlled by the Bank of England (Central Bank).

Local government bonds-in China

The so-called local bonds in China refer to the local government as the main issuer of government bonds. However, China's bond industry also tends to list bonds issued by local enterprises as the category of local bonds. In the late 1980s and early 1990s, many local governments issued local bonds to raise funds to build roads and bridges. Some are even interest-free and are apportioned to various units in the name of supporting state construction, and even more directly serve as part of the salary. But in 1993, this behavior was stopped by the State Council because of doubts about the ability of local governments to honor their commitments. Article 28 of the "Budget Law of the People's Republic of China" promulgated thereafter clearly states that "except as otherwise provided by law and the State Council, local governments shall not issue local government bonds."

China's local government bonds first appeared in the early days of the founding of the People's Republic of China. After the restoration of national bonds in 1981, local bonds disappeared. In 1993, local government bonds were explicitly "suspended" by the State Council because of "doubts on the ability of local governments to honor their debt" . Article 28 of the Budget Law, which came into effect on January 1, 1995, clearly stipulates that local governments shall not issue local government bonds unless otherwise provided by law and the State Council. The ban on "local government bonds" remained in place until 2009.