Government bonds - a return to the past?
Government loan bonds are one of the common securities issued by the state. The very first papers of this type were issued back in 1922, when many residents of the country did not even know that this type of paper was possible.
Objectives of government bonds
The Ministry of Finance of our country is responsible for ensuring that the issuance of a given circulation of government bonds takes place. The Ministry of Finance is carrying out this process for one reason only - no one else can so tightly control printing and distribution among consumers.
Immediately it should be said that government bonds are issued quite infrequently. The next edition is done only if circumstances are moved.
And the main goal of issuing a regular government bond is to replenish the country's treasury.That is, the state issues securities for individuals and legal entities with one goal - to provide new financial injections. And if we compare this with ordinary lending (which will be much clearer for a simple inhabitant), then, in fact, the state takes a loan from the population for a certain period. A guarantee of his return and acts bond. And the money is taken at a certain interest, which at the time of the refund will also be included in the payment.
Domestic government bonds. Timing
In the existing legislation, the possible forms of issuing government bonds are very clearly considered. In addition, the law also discusses the possible timing of release of securities:
- Short term. For such bonds, the state undertakes to make all necessary payments within five years. In the case of any delay from above, additional interest is charged.
- Long term. Their validity is approximately thirty years. And during this period, no one forbids to use them.
- Unlimited. This type of bonds is issued quite rarely, since they are not beneficial either to the state or to the consumers themselves.You can use them throughout life. But many people remember the history of bonds from the past and are skeptical about such a period of their validity.
Many are interested in the question of how interest is paid after the expiration of the term and whether it is done only once for the whole period or once a quarter, year, etc.
On what government bonds were purchased and under what conditions, and interest will depend. So, for example, in a calm economic situation, when there are no obvious costs and no crises, the state issues fewer securities, and the interest on them is not so high. This happens because there is no clearly expressed need for additional financial investments, and, in principle, there is nothing to attract investors.
But if the economic crisis is coming and it is necessary to replenish the treasury, then bonds will begin to be issued at higher interest rates. Moreover, in order to attract as many customers as possible, almost “ideal” conditions are created: payments can be made once a quarter, and interest can increase with each new year.
And if everything is more or less clear with interest, then the following question arises: "What are the money back guarantees?" Well, here you can say only one thing. Bonds of the state federal loan are one of the most reliable securities, the payment of funds for which is guaranteed by the state. But no one is immune from default, crisis, etc. And therefore, if the state defaults, neither deposits in banks nor funds on bonds will be redeemed and returned to consumers, because the state is bankrupt.
Redemption of bonds
In the existing legislation all issues related to the redemption of bonds are clearly discussed. So, most often the refund is carried out strictly after their expiration date. And throughout the entire period, interest is charged to the person’s account for using the amount provided.
If interest bonds were acquired, after the expiration of the term, the interest for using the funds will be added to the principal amount.
If these were conversion bonds of a government loan, interest is calculated once every six months.
That is why it is necessary to find out this information at the moment when the contract for the purchase of these securities is concluded.
1982 government bonds
Many people remember exactly this year, when the USSR last issued its bonds and, to a great regret, people did not make a single payment on them. And the following happened. By that time, when the population stood in line for their money, the state, in fact, no longer existed, and the bonds depreciated every day more and more, turning into simply beautiful and rustling papers. It was then that the distrust of the governing heads increased to such an extent that to this day it remains.
But some saved those bonds and, to their joy, sold them to collectors, returning at least a small part of the investment.
Securities of the State Savings Loan
State savings bonds are one of the youngest securities issued by the state. Their main difference is that almost all organizations can buy papers in open or closed auctions.And payments on them and interest accrual occurs depending on the economic situation in the country.
Not all citizens of our country trust officials and acquire government bonds. And for good reason. Of course, this is the situation in the 90s of the 20th century. But today these securities are considered among the most reliable.