Fixed Income Bonds are the types of bonds which generate a fixed income for its investors and are dispersed to the investors at a regular period of interval. These interest payments associated with such a bond is generally low because the risk associated with is almost nil. The most popular Fixed Income Bonds in the bond market are the ones which are issued by the governments such as he Government Bonds. Another form of the Fixed Income Bonds are the GIBs (that is Guaranteed Income Bonds).
The Government Bonds are those debt instruments and are issued by the domestic governments for its residents only. Generally, the phenomenon of a government going bankrupt is not observed naturally. Hence the risk associated with the government bonds are the least. This almost nil default risk makes this bond a highly secured one. Thus, the compensation for holding such a bond is also very low in comparison to the other debt instruments. Government issuing this bond offers the prospective investors a fixed yield for holding this bond.
Government Bonds are also of different types which can be differentiated from one another according to their respective time span for maturity. The different types of government bonds can be classified into the following types :-
Government Bills
Bonds issued by the Government having a maturity period of less then 1 year are called Government bills. The income generated by this type of security is of fixed type and hence are regarded as Fixed Income Bonds.
Government Notes
Bonds issued by the Government having a maturity period of more than one year but less than ten years are regarded as the Government Notes. The rate of interests associated with such bonds are also fixed income type and consequently are known as Fixed Income Bonds. In case of this type of bond, the rate of interest offered by the government is generally higher than the government bills.
Government Bills
Bonds issued by the Government having a maturity period of more than ten years are called the Government Bonds. It assure the investors that it would pay a fixed income on a periodic basis for the entire life span of the bond. The rate of interest offered by the government in case of the Government Bonds are generally higher than both the government bills and the government notes. Thus these bonds are also called the Fixed Income Bonds.
Government Bonds are generally considered to be quite safe and its intensity increases with the development and growth of the country. The government bonds of the developed countries are generally regarded to be more secured than the developing or the underdeveloped ones.
Another form of Fixed Income Bonds are the Guaranteed Income Bonds which too offers fixed income to its holders. This form of bonds assure its investors with a fixed amount of money at a regular period of time for the entire life time of the bond. Normally, in case of the GIBs, the maturity period varies from one year to five years. The Guaranteed Income Bonds are issued by the insurance companies. The minimum amount of investment in case of such security is five thousand pounds and the maximum is one million pounds. It may happen that the insurance company that is issuing the GIB becomes bankrupt then the investors or the holders of the same are liable to compensated with an assured amount of two thousand pounds and ninety per cent of the remaining amount is liable to be refunded.