The Complete Beginner's Guide to Government Bonds
Updated: 2019-11-25T21:03:05Z
minute read

If we remove all the confusing branches of the government, we will soon realize, that in its heart, the government is simply a business entity.

The Complete Beginner's Guide to Government Bonds
"person-holding-black-and-grey-pen" by Pixabay is licensed under CC0

Like all businesses, it needs money to operate. One way of getting the funds for its operation is through taxes. Taxes are kind of a one-way contribution, because depending on how the government uses the money, you may or may not reap its benefits. You can think of taxes as a donation to a cause.

So, why not become an investor? Investing in Government Bonds, Bills, and Notes.

What Is a Government Security?

It is a debt obligation that is issued by a government that promises repayment when it reaches maturity date.

Government Securities are considered low-risk investments because it is backed by the government itself. The collection of taxes of the government helps in the mitigation of risks.

What Are the Types of Government Bonds?

  • Treasury Bonds or T-Bonds
  • Treasury Bills or T-Bills
  • Treasury Notes or T-Notes

What Is a Treasury Bond?

Also referred as long bonds because they take the longest to mature. They are offered to investors in a term of up to 30 years to maturity.

  • T-bonds have a fixed-interest payment
  • They pay the highest interest rates because they require the longest term of the investment
  • The prices at which they are issued fluctuate more than the other forms of government investment.

What Is a Treasury Note?

Are similar to T-bonds, but are offered in a wide range of terms as short as two years and no longer than 10 years. It also generate interest payments. But are lower compared to T-bonds.

  • The 10-year Treasury Note (10 Year Treasury Yield) is the most closely watched government bond. As it is used as a benchmark rate for banks to calculate mortgage rates.

What Is a Treasury Bill?

Have the shortest terms of all. They're issued with maturity dates set at four, eight, 13, 26, and 52 weeks.

  • T-bills are auctioned off to investors at a discount to par or face value.
  • The difference between the par value and the discount price paid at purchase is the investor's return.

Where Can I Buy Government Securities?

Given this day and age, almost all countries' treasury branches are connected to banks. Also, some treasury websites (depending on the country) have an online facility to accept online purchases.

Visit The Philippine Treasury Website for the currently offered securities.

How Can I Buy Government Securities?

  1. Visit the Government's Treasury Office or its website to inquire of the currently offered T-Bonds, T-Bills, and T-Notes.
  2. Get the list of banking institutions participating in the offer.
  3. Choose the government security to invest. You can base your selection in the following criteria: Investment Capital, Time Horizon, and Financial Goal.
  4. Select the participating bank. Depending on the bank, the process of the purchase can be fully online or you may need to visit for some paper work.
  5. After paying the necessary fees, the bank or via your request can give you a certificate as proof of your purchase and ownership of such government security.
  6. Congratulations! You are now a government investor!

Just paying your taxes is a slightly one-way contribution. Might as well utilize the investor route, which is two-way (Give and Take).

“It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for."
Robert Kiyosaki

- The Affluent Perspective by Ælfræd "Elf Counsel"

back to top