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Investing in treasury bonds

Investing money in treasury bonds


Apart from bank deposits, bonds are among the oldest financial products available on the financial market. Considered to be unprofitable but secure, bonds are still very popular both among individual customers and financial institutions.

Like any financial product, they have their supporters and opponents. What is worth knowing before we decide to buy bonds?

A few words about the bond history


The history of bonds dates back to the time when the capital market was established. This instrument was particularly widespread in the eighteenth and nineteenth centuries in various forms (debentures, government loans, etc.).

Currently, various types of bonds are being issued in the world, ranging from government (tax) bonds, starting with "junk" bonds issued in large numbers by dynamic companies and ending with "junk" bonds.

Banks, investment and pension funds are the biggest players in the bond market.

The biggest advantage of treasury bonds is the fact that the issuer is the state, which ensures investment safety. The second important issue is that the State Treasury constantly needs funds for the day-to-day operation and covering budget deficits. As a result, new issues of treasury bonds are appearing on the market.

For whom are the treasury bonds for?


Treasury bonds are certainly a financial product for people who value security.

A certain, but not very high profit is the most important for them. The risk of investing in treasury bonds is reduced to a minimum.

The only risk we bear is related to treasury bonds with a fixed interest rate at the time when national banks change interest rates.

If, for example, a national bank raises interest rates, our treasury bonds will become less attractive, as their interest rates remain unchanged in the face of rising national bank rates. But the reduction of the national bank's interest rates already makes our treasury bonds more attractive, because their interest rates do not change in the face of the declining rates of the national bank.

Advantages of treasury bonds - bonds and deposits


As in the case of deposits, the greatest benefit is a certain profit.
Depending on the type of bond, profits (interest) are paid out on a quarterly basis on a semi-annual basis or at the end of the maturity date

Minuses of treasury  bonds


Limiting the possibility of buying bonds to a specific subscription period.

The return is higher than in the case of investments, but given the investment period, it is too low in comparison to other forms of investment.

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