Explore Government Bonds With Securities And Sovereign Debt

By Author: Ravi Fernandes
Total Articles: 78
Comment this article

In the 1990s, the Indian government grew serious about raising debt capital through Government Securities, also called Bonds or Gilts. Before the period, while such borrowings used to take form, they remained dominated by large investors like banks and other established companies.
Where and how should you start if you intend to explore the Bond market in India? What should you know? The following are the features affiliated with Government Securities in India in current times:
Security
Despite changes over the last three decades, a cursory glance at prevailing data would reveal that an overwhelming majority of investors in India still trust the government far more than even the most seemingly infallible private corporations. Indeed, since few to no instances of defaults on the part of governments have come to the fore, the creditworthiness of Bonds issued by them ranks higher than that of other Bond categories by a good distance.
Investment horizon
G-Sec Bonds in India offer a great abundance of options ...
... regarding holding periods and investment horizons. From short-term Bonds spanning a year to long-term Bonds spanning between five and 40 years, the range of options for Government Securities efficiently caters to its investor base's varying needs, demands, and goals.
Liquidity
Generally, Government Bonds are understood to have a fine quotient of secondary market liquidity. However, liquidity situations generally take form as the product nears the maturity period and when market activity is affected by macroeconomic changes or vitally relevant policy decisions.
However, compared to other types of Bond offerings, Government Bonds fare better than them in terms of liquidity, primarily owing to an established secondary market and the inclusion of Government Bonds in reputed indices.
Gains and losses
While Government Bonds offer a good measure of security, the total returns derived from a Bond Investment, on average, remain far lower than those derived from high-risk investments like Direct Equity and Mutual Funds. Indeed, in a high-inflation environment, the chances of a decline in the value of real investments in respect of Government Bonds remain high.
However, since these gains fare better than traditional options like Fixed Deposits, investments in Government Bonds offer a middle ground for investors looking for a combination of limited risks and reasonably higher returns.
Ease of access
Unlike Corporate Bonds in India, which are privately placed and dominated by institutional investors, Government Bonds allow individual investors to enter the Bond market with an investment as low as Rs. 1,000, thus catering to small-income and retail investors. Similarly, Treasury Bills are easy for retail investors to access. 
The RBI conducts weekly auctions for T-bills that are open to all investors. This non-competitive bidding system makes it easy for new investors to participate.
Conclusion
Investment in Government Bonds harbours the potential to reconcile the dilemma of investors who wish to avoid riskier choices while continuing to expect reasonable total returns from their investments.