Government Securities Market

Bonds with Variable Interest Rates

• Bonds having variable interest rates do not have a predetermined coupon payment schedule. September 1995 was the first month in which the government issued bonds with a variable interest rate.
• Interest on variable coupon bonds must be recalculate every three months to account for fluctuations in the benchmark rate. The term “floating rate bond” is use to describe a bond whose interest rate will fluctuate at predetermined intervals during its duration.

Benefits of Government Securities Market

This section is a summary of reasons why purchasing government bonds may be an effective method for saving money. These arguments are provided to support the hypothesis presented in the previous section. In the following paragraphs, we will discuss the benefits of government securities market.

Constant Financial Gain

In order to comply with RBI regulations, bond interest must be payable out every six months. This is excellent news for bond investors, as it increases the likelihood that they will get monthly dividends from their investments.

Risk-free

When you purchase securities from government securities market, your money is protectable against both criminals and inflation. They are the most reliable method of making someone feel secure and at peace. If an investor desires security, they could purchase government bonds.

Portfolio Diversification

If a person wishes to reduce their overall degree of risk, they should consider purchasing government-issued bonds. The risk associated with holding government bonds in a portfolio is significantly lower than the risk associated with holding other forms of bonds.

Returns

The majority of the time, the interest rates on bank deposits and government bonds are relatively similar. Both the loan amount and the interest rate are guarantee to remain constant over the life of the loan. There is a fair likelihood that the market value of these bonds will one day exceed the value of cash in the bank.