High-quality bonds are issued by the governments of Italy, Germany, France, Japan, the UK and the US. The government bonds issued by the US Department of the Treasury are considered to be the safest and are globally accepted.
Government bonds are valued in increments of 100 and have a maturity period of one year to 30 years. However, these bonds are generally not bought at face value and are acquired either at a premium or at a discount. A bondholder receives a fixed interestrate (also called coupon rate) during the term of the bond. The interest is typically made biannually (half-yearly payments). The entire principal amount (the face value of the bond) is received when the bond reaches its maturity date.
Instead of waiting till the maturity date to recover the principal amount, bondholders can sell their government bonds in the secondary market. Bondholders can realize a profit if the prevailing interest rate falls below the coupon rate after the bond is issued.
The benefits of government bonds include: