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Finance GlossaryGovernment Bonds
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Government Bonds

Definition of Government Bonds

Government bonds are debt instruments that allow the central banks to raise capital to finance operations. The types of government bonds are:

  • Treasury Bills
  • Fixed Rate Bonds
  • Floating Rate Bonds
  • State Development Loans
  • Sovereign Gold Bonds
  • Zero Coupon Bonds

Every government bond has a credit rating that’s based on the financial health of the country. The government is the apex institution of any country, which is why their credit rating is the high.

In India, you’ll notice government bonds with the credit rating SOV. This is known as a sovereign rating.

Related Terms

Forex Futures Trading

Forex futures trading is the buying and selling of exchange-traded futures contracts for currency pairs . A forex futures contract gives the holder the right and the obligation to buy or sell a pair of currencies at a predetermined price and date. The important components of forex futures trading include:

  • Forex pair: the currency you will buy in exchange of the other at the end of the futures contract
  • Lot size: the value of the currency included in the contract
  • Contract price: the price at which the futures contract is trading
  • Spot price: the latest forex rate for the currency pair, different from the contract price
  • Margin: the amount of money you’re required to deposit with your currency trading platform
  • Tick size: the minimum amount by which a forex futures contract can move, which is Rs. 0.0025 in India
  • Expiration date: the preagreed day on which the contract must be excercised or squared off

Forex futures trading in India is possible through three exchanges: NSE, BSE, and MSE. The forex futures contracts are standardized derivatives that can be traded between 9.00 AM to 7.30 PM. Forex futures in India are cash settled, meaning profits or losses are settled in INR while the base currency is not delivered.

Limit Order

A limit order is an instruction that specifies the price at which a financial security should be bought and sold known as the limit price. The broker will execute the order only if the limit price is met. But there is no guarantee that a limit order will be executed since it is essentially in queue.

Doji Pattern

A Doji is a candlestick pattern that is formed when the open and close price of a share or market is identical. The word Doji means indecision in Japanese, which is fitting because the Doji pattern is an indicator of indecisiveness. In terms of appearance, a Doji looks like a cross or like the letter T.

Cash Commodity

A cash commodity refers to physical goods like aluminium, cotton, gold, silver, zinc, and other tangible goods which are delivered to a trader or company most commonly after exercising derivatives like options and futures contracts.

Cash commodities are also known as actuals. A derivative contract for cash commodities will explicitly state the delivery date, price, and quantity. These details are necessary as some contracts may not involve the delivery of goods.

Commodity Futures

A commodity futures is a contract between two parties to buy or sell an underlying commodity like gold, silver, corn, and others are a pre-determined price and date.

A commodity futures contract is an obligation that’s entered into not just by retail traders but also companies who want to lock in a favorable price. This is the place to understand all about futures contracts in trading.

Book Entry Securities

Book entry securities are financial instruments like stocks, bonds, ETFs, and others whose ownership is recorded and tracked electronically. Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.

Book entries have made ownership certificates obsolete as they track who owns what electronically.

The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.



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