Government Bond Rates

Bonds have a long history. The first known Government Bond was issued by England in 1693. In this particular case, England needed the funds to finance a war against France. Today, governments are still issuing bonds in order to fund their own financial enterprises. These bonds will be in the denomination of the country's own currency and the issuing government will have an assigned credit rating which will encourage or discourage investors. Standard & Poor's and Moody's are the two major debt-rating agencies which will monitor governments closely and assign corresponding credit ratings.

The United States Government is rated AAA (which is the highest possible rating) by both Standard & Poor's and Moody's; their ratings are based on the projected ability of the United States to repay its debts and meet its financial obligations. These two rating agencies also rate only seventeen nations out of 124 with AAA ratings. These nations include Canada, France, Germany, the United Kingdom, Italy, and Japan--all of which issue their own Government Bonds. The relative stability of the U.S. and these nations, their economies and credit-worthiness, will increase the desirability of their Government Bonds. Moreover, Government Bonds are usually regarded as risk-free since governments will raise taxes or even print money to repay their domestic currency debt.

Additionally, U.S. Government Bonds are called Treasurys and are categorized as follows: U.S. Treasury Bills with maturity from ninety days to one year; U.S. Treasury notes with maturity from two to ten years; and U.S. Treasury bonds with maturity from ten to thirty years. The Treasury bill, or T-bill, will sell at a lesser price than its face value, and at maturity will reach its full face value. T-bonds pay interest on the same schedule as notes, but maturity length is longer. Savings bonds, including the E and EE series, usually begin at face value and earn regular interest, as well. I-bonds and TIPS, or Treasury Inflation-Protected Securities, will earn a fixed rate of interest plus a rate that will vary in order to keep up with inflation. Since thirty year Treasury bonds have a longer maturity length, they will also usually have higher interest rates (or coupons). Government Bond Rates are assigned fixed interest rates which are paid every six months until the bond's maturity. Since Government Bond Rates do offer stable and consistent income revenues for investors, U.S. Government Bonds are very popular with both domestic and foreign investors.