Government Bonds
Securities with which the owner’s right is associated to demand from
the issuer, i.e. the state, the repayment of an owed amount in the nominal
value at the maturity date
Government Bonds
Government Bonds
Government bonds are notes (securities) with which the owner’s right is associated to demand from the issuer, i.e. the state, the repayment of an owed amount in the nominal value on the maturity date. If the bond bears a fixed yield (coupon), the issuer pledges to pay it out on the predetermined date. Bond issuers are individual states which can finance a state debt in this manner. The degree of risk is often measured by a rating. The rating indicates the degree of risk with which the given country will meet its obligations to investors.
The purchase of a bond will enable you to save money for a specific period if you keep the bonds to the maturity date, also for a predetermined yield.
Your advantages
- Thanks to the fixed maturity date, other investments can be planned.
- The current yield to maturity together with the bond selling price is published daily in the bond price list.
You should know
- The bond selling and purchase price changes every day due to yield changes on the bond market. If an investor keeps bonds to the maturity date, price fluctuations will not affect its total yield.
- The transfer will be settled within 2 business days after ordering a trade, if the investor pays the price of the purchased bond.
- A yield to maturity is the yield of a bond held to its maturity date. It is based on the current bond selling price and future interest yields. The yield to maturity is used to compare the yields of bonds with a different period to maturity and coupons of varying amounts.
- The price for the procured sale of structured notes, premium, subordinated and other bonds is expressed in percentages of the trade volume. You can find details in the Price List.
- In the period between the payments of the interest yield coupon is determined as part of the interest yield, to which the bondholder is entitled for the period from the issue date or from the date of the final coupon payment calculated up to the trade settlement date. The AIY is automatically added to the bond price and can be positive and negative.
- Issue additions of bonds issued by the Czech Republic are available on the website of the Ministry of Finance of the Czech Republic.
What else should you know about Government Bonds
The interest yield is paid out usually once a year on a predetermined date. The bond nominal value is paid out together with the final coupon on the maturity date. The price for which bonds are purchased is also important for the real investment yield. At the time when the current yields on the bond market are lower than the bond interest yield, bonds are sold for a price higher than their nominal value and vice versa. Therefore, the current yield to maturity calculated on the basis of the current selling price and yields paid out in future is lower or higher than the bond interest yield.
... increasing interest rates?
An increase in interest rates on the market results in a fall in prices of already issued bonds with a fixed coupon. If current interest rates are higher than those at the time that the bond was issued, under otherwise identical terms and conditions the bond is sold for a price lower than its nominal value.
... stable interest rates?
Under otherwise identical terms and conditions, stable interest rates do not affect the bond price.
... falling interest rates?
A fall in interest rates on the market results in an increase in prices of already issued bonds with a fixed coupon. If current interest rates are lower than those at the time that the bond was issued, under otherwise identical terms and conditions the bond is sold for a price higher than its nominal value.
Terms of purchase and sale of bonds and structured notes
Taxation of investment yields
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