What is Corporate And Government Bonds?
A Government Bond is a bond issued by a national government usually denominated in the country’s own currency it gives you access to government bonds and Corporate Bond is issued by companies ranging from large institutions with varying levels of debt to small, highly leveraged, start-up corporations. The most important difference between corporate bonds and government bonds is their risk profile, Corporate bonds usually offer a higher yield than government bonds because their credit risk is generally greater. This is not always the case however as we have seen more recently.
About Corporate Bonds
A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as ongoing operations or to expand a business, the term is usually applied to long-term debt instruments, with the maturity of at least one year, corporate debt instruments with a maturity shorter than one year. Sometimes, the term is used to include all bonds except those issued by governments in their own currencies, in this case, governments issuing in other currencies will be included. Bonds issued by supranational organizations strictly speaking, however, it only applies to those issued by corporations, the bonds of local authorities municipal bonds are not included.
About Government Bonds
A government bond is a debt security issued by a government to support government spending bonds including savings bonds, treasury bonds, and inflation-protected securities. Before investing in the bond, investors need to assess several risks with the country, political, inflation with interest rate, although the government usually has low credit risk.
– Less risky than equities or property.
– Higher growth potential than government bonds.
– Diversifier for low-medium, medium and medium-high risk portfolios.
– Less vulnerable to inflation and interest rate increases than government bonds
due to shorter periods to redemption.
