Government Stocks are known in the UK as gilt-edged securities or “gilts”. In Malta, they are generally referred to as MGS’s – Malta Government Stocks.
Government Bonds are deemed to be among the most secure investments. They yield a guaranteed income. They are issued by Governments at an agreed rate of interest (known as the “coupon”) for a determined period of time, and provide the investor with fixed, annual or semi-annual, interest payments.
Usually issued at par (€100), they can also be issued at a discount or at a premium. If they are held to maturity, known as the “redemption date”, they are redeemed at par.
Government Bonds are traded on the stock market and can be partially or fully sold before maturity.
Generally speaking, when interest rates rise, the value of Bonds falls, and vice-versa.
Their price fluctuates depending on the expectation of interest rate movements. The longer the term, the wider is the potential fluctuation.
But as stated above, at maturity Government bonds are redeemed at par.
Independent rating agencies – e.g. Standard & Poors – provide investors with a regularly updated service on the credit rating they assign to Bonds issued by different Governments.